Gold markets have shot higher initially during the trading session on Monday but gave back gains. The $1680 level continues to be important and has acted quite significantly as resistance. Ultimately, this is a market that has given bank every time it has gained, and the 50-Day EMA is starting to break down to where that level as well. With that being the case, the gold market still shows more of a “fade the rally” scenario.
The shape of the candlestick is a bit of a shooting star, and if we break down below the bottom of the cancer, it’s likely that we could go much lower. In fact, if we break down below the last couple of lows, we are violating the bottom of a “double bottom”, which is obviously a very bearish sign. At that point, the market is likely to go down to the $1600 level. The $1600 level is an area that will have a little bit of psychology attached to it, but it’s likely that we could go down to the $1500 level.
In order to get bullish of the gold market, you would need to see several things happen at the same time. For example, you would need to see the interest rates in America drop a bit. They are like a freight train right now, and even when they do drop, it seems to be rather short-lived at best.
- The 50-Day EMA is above and dropping so that obviously could offer a significant amount of resistance, and then there is the downtrend line that I have marked on the chart.
- Beyond that, you also have to keep in mind that the $1700 level has a certain amount of psychology attached to it as well.
All things being equal, I think we continue to see plenty of selling pressure, especially as the US dollar has been like a wrecking ball against almost everything. The market has a lot of volatility in it, and that typically does not look good for risk appetite anyway. However, there will come a day where the Federal Reserve decides to pivot, and when they do gold markets will be one of the best places to be. Until then, it simply either a “fade the rally” type of situation, or waiting patiently to get a buying opportunity.
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