Gold markets got crushed on Monday to break through the 50-day EMA and then fell down to break below the $1900 level. There is a “zone of support between the $1900 level and the $1880 level. Because of this, the market will continue to be watching this area closely, because if we do break down below the $1880 level, it could very well kick off the massive selling. That being said, there is a lot of “risk-off behavior” around the world, so it will be interesting to see whether or not this can continue.
One of the biggest things to work against the value of gold at the moment is the yield that we see in the 10-year note in America. That has had people looking for the “real yield” that you can get in the bond market, and of course, it also drives up the value of the US dollar because so many foreigners will be paying close attention to it. Beyond that, when you look at the length of the candlestick, it seems as if we are ready to break down further because when you close this low in the daily range, things typically get ugly rather quickly.
The market is at a serious crossroads right now, so it will be interesting to see how this plays out. If we do bounce, that could send the market reaching the 50-day EMA, which is currently at the $1926 level. The market is one that you should approach with caution because there is so much volatility out there at the moment. This is not only true with the gold market but all markets in general.
If we did turn around, I believe that the $1970 level will be a difficult barrier to overcome after this most recent move. If we were to break above there, then we could go much higher. It is worth noting that gold seems to be a bit hesitant to break down during the day, but we did get there rather quickly. This would typically work off some of the momentum and it is possible that the market needs to bounce at the very least. Regardless, if we get below that $1880 level, it is going to be difficult to see anything bullish in the short term.
