- The gold market initially tried to rally during the trading session on Thursday but gave back gains as we continue to see a lot of noisy behavior and a lot of questions about the interest rate market.
- The GDP numbers in the United States came out a little bit stronger than anticipated.
- Therefore there has been a bit more volatility in the market as the US dollar has been all over the place.
At the same time, the European Central Bank brought interest rates up to 2%, and although that was expected, it puts a little bit of upward pressure on the Euro, and therefore downward pressure on the US dollar. Ultimately, this is a market that continues to see a downward move, especially with the 50-Day EMA above. It causes a little bit of dynamic resistance, and in a sense it’s a little bit of a downtrend line. After that, we have a downtrend line just above them, so it all comes together to offer quite a bit of selling pressure.
Looking at Rallies as Shorting Opportunities
If we do break down below the bottom of the candlestick for the trading session, then I think it’s likely that we go to test the double bottom just below. Breaking below that opens the possibility of a move down to the $1600 level, and then the $1500 level after that which of course is psychologically important and will attract a lot of attention in and of itself.
Even though we get rallies from time to time, they have so far proven to be nice shorting opportunities. I don’t necessarily think that we are during any major trend change, and it’s worth noting that the $1680 level had previously been supported, so it should now be resistance. The market has had a couple of these moves over the last several months, where everybody was hoping that the central banks around the world were done raising rates, but the one that remained steadfast is the Federal Reserve, and that’s exactly what is going to influence this market more than anything else. I continue to fade rallies when we get opportunities, recognizing that volatility will continue to be a major problem in this market, and therefore I am keeping my position size smaller than usual in this type of environment.
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