Gold markets have surged higher and broken through the crucial $1900 level at the beginning of Monday's trading session. This move is based on the speculation that the Federal Reserve may change its monetary policy now that regulators are stepping in to save Silicon Valley Bank. However, this is unlikely to happen, and it could be a bull trap, as the Federal Reserve is expected to maintain its need for tighter monetary policy. Moreover, inflation is a concern that is not going anywhere.
Gold Technical Levels in Focus
- Despite forming a double bottom at the 200-Day EMA, this move may be overdone in the short term.
- A pullback could be expected, and traders need to watch and see what happens next.
- There is a lot of noise in the market, and gold is heading into an area that has seen a lot of selling before, as evidenced by the two massive red candlesticks in February from the highs.
Gold is likely to settle down a bit, potentially sending the market back down to the 50-Day EMA. Traders need to see some type of exhaustion candlesticks to get involved in the downside, or a complete turnaround in the interest rate markets, which may happen over time. This could increase the value of the US dollar and, in turn, result in a lower price for gold. As volatility is expected, traders should not chase gold all the way up, even if they knew it was going to hit the highs. There will be pullbacks, and traders need to monitor the market over the next several sessions to understand where it's heading.
Ultimately, gold markets have gapped higher and broken through the $1900 level, based on the speculation that the Federal Reserve may change its monetary policy. However, this is unlikely, and a bull trap may be forming. Traders need to be cautious and watch for a potential pullback, as gold is heading into an area that has seen a lot of selling previously. They need to wait for exhaustion candlesticks or a complete turnaround in the interest rate markets before getting involved in the downside. Gold prices may settle down, and traders need to keep an eye on the market's volatility to avoid potential losses. Position sizing is going to be crucial in this market, as I expect the volatility to get worse, not better.
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