Gold markets rallied rather significantly in the early hours on Monday, as the market reached the $1725 level. However, we have given back quite a bit of the gain, so it looks as if the market is going to end up forming an inverted hammer, which is not a good look. In other words, the next daily candlestick could give us a “heads up” as to where we are going for a bigger move, and therefore you should be paying close attention to this.
When you look at this chart, it’s obvious that the $1700 level has been supported multiple times in the past, and it’s likely that we will see that area continue to be stubborn to break through. However, if we were to break through the overall support level, which I think extends down to the $1680 level, it could open up the possibility of a move to much lower pricing. At that point, we could be talking about dropping down to the $1500 level, which is a large, round, psychologically significant figure. It’s also an area where we have seen a lot of movement previously, so I think it will be attractive to buyers.
On the other hand, if we were to break above the $1725 level, then it’s possible that we could go to the $1750 level. That is an area that should be important, so if we were to break above it, then it’s likely that we could go to the $1800 level. The $1800 level also features the previous uptrend line, a large, round, psychologically significant figure, and then the 50-day EMA which sits just above there. Ultimately, I would love to short this market near the $1800 level, unless of course there is some type of change in Federal Reserve monetary policy. Until then, I don’t necessarily believe that the markets are going to be very bullish at all. With that in mind, I think we’ve got a scenario where the market continues to see plenty of reasons to fade rallies, so I think it’s likely that we are going to see plenty of hesitation to go higher, and we will continue to see the US dollar act as if it is a wrecking ball against almost all assets.
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