Gold markets plunged quite drastically again on Tuesday to break through the $1920 level before finding buyers again. This is a market that is now looking like it has been oversold, after initially going parabolic. Ironically, when you look at the oil chart, you see the same thing. The question now becomes whether or not the commodity trade is starting to die out?
High prices are the best fix for high prices. That might be what we are seeing in the gold and the oil markets because quite frankly they got far too ahead of themselves. If that is going to be the case, then it will be interesting to see how this plays out over the next 24 hours as we have the Federal Reserve meeting and perhaps, more importantly, the press conference and statement.
While most people understand that we are more than likely going to see a 25 basis points rate hike, the reality is that what people are worried about now is whether or not the Federal Reserve is going to continue to tighten. If they do, that will have a major influence on the US dollar, and perhaps some influence in this market. I think we will see a lot of noise once that announcement is made, and then we could make a bit of a more educated guess as to where we are going next. After all, gold markets are highly sensitive to the US dollar and there is a lot of uncertainty out there right now.
The area between $1920 and $1885 underneath it was previous resistance. That area should now be significant support, based upon “market memory”, so I will be looking for buying opportunities. If we break down below the $1885 level, then things get a little bit different as far as attitude is concerned and I think gold will probably give it all up at that point. Gold is a very fickle instrument, and is not something that most retail traders should be involved in. This is because there are so many different moving pieces in the gold market, not to mention the fact that metals markets are extraordinarily manipulated, thereby making them very dangerous. You can see over the last couple of weeks how many accounts probably have been wiped out
