Market conditions could send this market back down, especially considering that the CPI numbers come out on Thursday.
- Gold markets have stalled a bit during the trading session on Wednesday, as we may have gotten a bit ahead of ourselves.
- Gold has taken off straight up in the air, and it does suggest that perhaps we are going to continue to be very noisy.
- Nonetheless, I think this is a situation where we have the market conditions that could send this market back down, especially considering that the CPI numbers come out on Thursday.
Will the Federal Reserve Pause on Interest Rates?
The candlestick for the day shows quite a bit of hesitation, and quite frankly that does make sense because momentum has to run out sooner or later. The CPI numbers will be highly influential as to where we go next, especially if they are hot, because the Federal Reserve is without a doubt the biggest driver of where things go at the moment. Traders continue to look at the Federal Reserve through the prism of tightening or pausing and keep hoping for pausing on interest rates. However, we continue to see economic numbers that suggest they are nowhere near that. If that’s going to be the case, then it does make a certain amount of sense that we would see the gold market struggle as interest rates continue to climb.
On the other hand, if the CPI never comes out relatively weak, we could see this market looked towards the $1725, and then eventually the 200-Day EMA. That of course is a longer-term indicator that a lot of people pay close attention to and is dropping from here. That could offer dynamic resistance and offer a bit of a ceiling for the market. I don’t necessarily think that it is going to be attempted, but then again, I have no idea what the CPI numbers will be.
If we do pullback from here, then you will have a serious argument to be made for consolidation. If we start to consolidate, that means we probably have further downward pressure due to the sense that the market has been in a downtrend previously, and typically consolidation leads to continuation. In that scenario, I have gold dropping down to the $1500 level, after making a couple of bumps along the way, specifically at the $1620 level, and then possibly even the $1600 level underneath there. Either way, it’s going to be volatile.