Gold markets did very little over the last couple of weeks, as we are trying to figure out whether or not we are going to bounce, or if we are going to break down. The 200-day EMA does attract a certain amount of attention, and I think a lot of buyers and sellers are starting to fight in this area. It’s also fitting that we are near the $1850 level because that’s an area that probably has a bit of psychology attached to itself anyway. With that in mind, I like the idea of waiting to see if we get an impulsive candlestick in one direction or the other that I can get involved in.
Looking at this chart, if we can break above the $1870 level, then we will challenge the 50-day EMA. If we can get above there, then it’s likely that gold will look at the $1900 level as a target, and then the $1975 level, where we had fallen so hard previously. This is a market that I think will continue to see a lot of volatility regardless, but if we were to break to the upside it would more likely than not be from some type of fundamental catalyst that will present itself in an obvious manner.
On the other hand, if we were to break down below the last couple of days, then the market could go to the $1825 level, followed by the $1800 level. I believe that the trend will be defended at the $1800 level because if we break through there, it’s likely that the market will start to fall apart and drop quite rapidly. Pay attention to interest rate markets in the United States, because if we start to see those spike again, it’s very likely that traders will get rid of the gold and start buying paper as it is a “risk-free asset.”
Pay attention to the US dollar, because it can have an inverse correlation to gold, but recently it’s actually been a relatively positive one. That happens in times of extreme fear, so we’ll have to wait and see how that all plays out, but right now it looks like the market is at least going to struggle to break out to the upside. More likely than not, we probably have more volatility and chop to deal with.
