Gold futures took off immediately on Monday, gapping much higher. This is being driven by a lot of geopolitical concerns now, as well as inflationary fears. As long as there are a lot of concerns about the Russia/Ukraine situation, there will more than likely be a lot of concerns that are covered up with gold purchases. Ultimately, gold looks as if it is trying to break out, but we do have a significant barrier just above that will come into the picture.
The $1880 level is the next barrier that everybody has to worry about, and I think we could see a little bit of profit-taking. However, if we were to break above the $1880 level, the gold market will more likely than not go looking towards the $1800 level. You should be advised that if tensions relax in Ukraine, it is likely that gold may lose some of its luster, at least for the short term. That being said, there are a lot of inflationary fears out there, so do not be surprised at all if gold picks right back up after some type of pullback.
Underneath, I would anticipate that the gap that we formed at the open of the session will more than likely be supportive, unless we get a huge run towards the US dollar. If we do, it is very possible that we could see this market break right back down towards the 50 day EMA. I am not currently expecting that, but it is a possibility that we need to keep in the back of our mind.
Position sizing will continue to be crucial in this market, just as it is in every other one. There are a lot of moving pieces right now and it would not take much to do a significant amount of damage to your trading account. Because of this, small positions are advised until we get some type of clarity as it looks like the market is trying to adjust its overall attitude when it comes to the geopolitical threat coming out of Russia, and the inflationary threat that has its own issues to bring to the table. I do believe that this week is going to be very noisy, so buying on the dip makes sense, but only in small bits and pieces. Chasing the trade all the way up here is a very dangerous thing to do.
