Gold markets initially tried to rally during the trading session on Tuesday, but gave bank gain to show signs of weakness yet again. In fact, we ended up dipping below the $1725 level, but have also found buyers in that area to support the market. This is a market that has sold off quite drastically, so therefore a little bit of sideways action could make quite a bit of sense.
Now you have asked the question as to whether or not the market is going to go sideways and kill some time, or if it is going to go much lower. The $1700 level would be the target on a breakdown, which is a large, round, psychologically significant figure, and an area where we have seen support previously. At this point, the market is very likely to pay close attention, and therefore it’s possible that we could see a bit of a bounce. However, if we were to break down below that level, then it’s likely that the market simply falls apart.
In that move, it’s likely that we could go down to the $1500 level, which is an area that is a major support level as well. However, if we turn around and rally, then it’s likely that this market could go reaching toward the $1750 level. Move above there then open to the possibility of gold rising to the $1800 level. This is an area that had been quite significant previously. However, if we can break above there, then it’s likely that we continue to go much higher.
Pay close attention to the US dollar, and then by extension the interest rates, due to the fact that the gold market is very sensitive to both of them. The size of the candlestick is somewhat reasonable for the day, so don’t necessarily think that we are in the “runaway train” lower. However, this is a market that I think will continue to pressure to the downside given enough time, therefore we need to look at it through that prism. I believe the gold has further to go to the downside, but eventually could end up being an excellent investment opportunity. It’s obvious that the market is going to continue to struggle, so therefore you need to keep in the back of your mind that when trying to trade it.
