Gold markets have fallen a bit during the trading session on Friday to reach the $1922 level before bouncing a bit. The market has shown quite a bit of support underneath and I think it is likely that we will continue to see a lot of noisy behavior. Even if we were to break down below the lows of the last couple of sessions, there are still multiple places where buyers could reenter the market.
When you look at the chart, it is easy to see that the 50 Day EMA and the $1900 level below is an area that people will pay attention to. As long as we stay above the $1900 level, I believe that the gold market is more likely than not going to continue to pay attention and therefore find buyers. In fact, it almost looks as if the market is consolidating between the $1900 level at the bottom and the $1970 level above.
The market is currently sitting right around the middle of that range, so one could even make the argument that gold is essentially at “fair value”, but I for one believe that the most important thing to pay attention to right now is the fact that buyers continue to return every time we dip. When you see such a clear support level, it is easy to imagine that a lot of buyers will continue to pay close attention to it. Having said that, if the market was to break down below the $1900 level, then it could change a lot of the attitude when it comes to the gold market.
If we do break down below the $1900 level, I believe that the gold market will then go looking towards the $1850 level underneath, which is essentially where the 200 Day EMA is racing toward at the moment. In general, I believe this market continues to be very noisy, but I do think that we are more likely to break above the $1970 level than not over the longer term. However, you can also make an argument that we are simply looking for the next impulsive candlestick to make a bigger move. Until we get it, I look at this as more or less a range-bound market that I can play on short-term charts with a short-term system.
