- The gold markets have gone back and forth during the trading session on Wednesday, as we are approaching the crucial $1800 level.
- This is an area that will attract a certain amount of attention since is a large, round, psychologically significant level, and an area that if you look to the left, you can see it was both massive resistances, as well as massive support previously. In other words, this is an area where you would expect price action to come back into the picture.
At this point, if we were to break above the $1800 level, then it’s possible that we have a bigger move to the upside, perhaps reaching to the $2000 level. On the other hand, if we break down from here, it would not be a huge surprise at all to see the gold market drop back down to the $1725 level, which is an area that previously had been resistant. In other words, this is an area that I think could be a nice target. If we break down below there, then gold almost certainly drops down to the 50-Day EMA. The 50-Day EMA sits just above the $1680 level and is starting to bounce.
Pay Attention to Interest Rates
The question at this point I think longer-term traders must ask is whether the recent breakout below the crucial $1680 level was simply a “rollover”, or if it was the first shot across the bow for a bigger selloff. It’s likely at this point that we continue to see a lot of erratic behavior. But that being the case, pay close attention to interest rates around the world, because we do continue to see a bit of a negative correlation to interest rates rising and of course the price of gold.
As we have seen traders get in front of the idea of central banks around the world listening to monetary policy. Quite frankly, they have gotten ahead of their own skis, so we will have to see whether any pullback ends up being a reversal, or just a simple bit of profit-taking. Regardless, at this point, I would not be a buyer until we break well above the $1800 level, something that we need a catalyst to make happen anytime soon.
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