Gold markets have broken significantly during the trading session on Thursday as we continue to see the US dollar strengthen. Interest rates spiked, and of course, this sends gold markets much lower. The fact that we have broken through the $1680 level, it’s likely that we have further to go to the downside. We could see the gold market go all the way down to the $1500 level, which is a large, round, psychologically significant figure.
When you look at this chart, you can see that the candlestick is very large, and that does suggest that we will have quite a bit of follow-through because candlesticks like this do not happen in a vacuum. We saw this the other day in various markets, including the stock market. All things being equal, this is a market that I think will eventually see quite a bit of pressure, perhaps even to break down below the $1500 level. The $1500 level is an area that has psychology attached to it, but more likely than not, we will drop down to the $1200 level.
Look at Rallies as Selling Opportunities
- Rallies now should be selling opportunities unless of course there was the possibility of some type of complete change in the Federal Reserve monetary policy, but I don’t see that happening anytime soon.
- We would have to overcome the 50-Day EMA at the very least to turn this market around, and even then, I think we would have to have some type of fundamental reason to think that things have changed.
- It is worth noting that the $1680 level is important because it had been supported for quite some time, going back several years.
Now that we have broken down below there, it is likely that we go much lower over the longer term, but we will get the occasional rally. Those rallies should be sold into at the first signs of exhaustion, and therefore it’s likely that we continue to see this as the trade opportunity for gold markets between now and the end of the year. The market will continue to be noise driven, and of course driven by the 10-year yield, as well as the US dollar. Keep an eye on all these charts, it will view a “heads up” as to where we get next.
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