Gold markets went back and forth on Tuesday, centering on the $1905 level. The $1920 level above is a significant resistance barrier, and it repelled gold during the day. That being said, there is significant support underneath at the $1880 level, so I do think at this point the market is starting to run out of momentum. Because of this, it is very likely that we will continue to go sideways and in this range for a while.
I would anticipate a bit of a pullback because we have gotten overdone. That being said, I think that a pullback offers a buying opportunity due to the fact that gold had been rallying before the Ukraine/Russia tensions. Sure, the border tensions in that region has accelerated the gold market, but we had already been pricing in a lack of growth and inflation, driving gold higher. We are simply overdone at this point, so I am waiting for an opportunity to pick it up at a lower price.
I would love to see gold drop towards the $1850 level, but I do not know that we will go that far. The $1880 level should be an area that offers a lot of support as well, so it will be worth paying close attention to. Alternately, if we did rally from here, then we could take out the $1920 level, which is a very strong resistance barrier. If we get above there, then it is likely that we could go much higher, perhaps reaching towards the $2000 level over the longer term. I think that is where we will go eventually, but at the very least I would anticipate that the market has a bit of a fight between here and there.
If we do get a spike in the US dollar, that could drag gold for a little bit, but I anticipate that both of these will go higher. As we slow down, people will be looking for signs of safety, and that of course will help gold. If we get some type of flareup in the Ukraine region, that would drive gold higher as well. I have no interest in shorting this market in the current macroeconomic environment, let alone the technical environment.
