Gold markets initially gapped higher to kick off the trading week and smash through the $1920 level. However, we have seen a certain amount of exhaustion above the $1920 level, and it suggests that we are going to see a little bit of selling pressure. Underneath, I see the $1880 level as an area that could cause a bit of support, and it is worth noting that the last three trading sessions have seen buyers jumping in at slightly higher levels.
Nonetheless, I think in the short term we will continue to see a lot of back and forth, mainly because the geopolitics of the Russia/Ukraine conflict continues to cause a lot of nervousness. Furthermore, we have a lot of concerns that the inflation headwinds are going to get out of control, and now people are starting to question whether or not the Federal Reserve can do the 50 basis point rate hike that some people were pricing in. It will be interesting to see this plays out because markets hate uncertainty, and uncertainty is probably the one thing that we have an abundance of.
Market participants continue to see more upward momentum overall, and at this point, we may be simply trying to grind away some of the froth in the market. After all, we got to the highs rather quickly, so to say that gold was overbought would be an obvious statement. Nonetheless, we also have to pay attention to the US dollar and what it is doing, because it is starting to show signs of strength yet again. If that is going to be the case, then it is very likely we will continue to see gold markets affected by that as well.
If we were to break down below the $1880 level, then it is likely that the market breaks down towards the 50 day EMA. While I do not necessarily think that will be easy to do, it is a possibility if we get a bit of profit-taking. Alternately, if we were to break above the $1930 level, we will more than likely go looking towards the highs that we hit during the panic on Thursday after Russia invaded Ukraine. The only thing I think you can count on here is going to be a lot of volatility so be cautious with your position size.
