Gold markets fell to kick off the Thursday trading session buyers continue to run back into the market in order to support it.
- Gold markets fell to kick off the Thursday trading session but have since seen buyers come back in to pick them back up.
- The $4400 level in the futures market continues to be an area of significant support, and while we have seen a lot of back-and-forth action, the reality is that we are pretty close to the all-time highs, and therefore, it's difficult to look at this as a market that should be shorted anytime soon.
With this, I think the market pulling back at any given point is to be thought of as a potential buying opportunity, but we also need to keep in mind that Friday features the non-farm payroll announcement, and that will cause volatility in the US dollar and, of course, interest rate expectations.
In that environment, we could go in either direction, but the longer-term trend is set to the upside, and it would take something pretty extraordinary coming out of the non-farm payroll announcement to change that attitude.
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Monetary Policy and Central Bank Demand
The Federal Reserve is expected to cut rates at least once this year, and for some traders, they also bet that they will be cutting not only in February but also in June, and that does provide a little bit of a floor for gold. Furthermore, central banks are hoarding gold again, and of course, there are plenty of geopolitical tensions out there that could continue to drive gold higher.
With all of that and just the simple technical analysis, I still think it's possible to get to $5000 this year, and quite frankly, I'd be surprised if we didn't. That is about 11% or 12% move, which over the course of a year isn't outrageous. Whether or not we break out and continue to blow through that level easily remains to be seen, but I think we've got a situation where, clearly, you're only trading in.
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