The gold market initially rallied a bit during Friday but was absolutely crushed later in the session.
GOLD
The gold market initially rallied a bit during the trading session on Friday but has been absolutely crushed as the idea of gravity has re-entered the market. The United States has avoided a government shutdown, so that probably began some of the selling pressure as some of the risk premium was taken out of the market.
That being said, we now find ourselves right at the $5,000 level. I think this is important because, quite frankly, if we can't hold $5,000 going into the weekend, I think that shows pretty significant weakness.
Downside Potential and Market Sentiment
In that environment, I would anticipate the gold market to drop to the $4,800 level and then possibly the $4,600 level, where the 50-day EMA currently resides. Quite frankly, despite the fact that I'm still bullish on gold, the reality is it was way too overdone.
This is true with most precious metals and metals in general. We even saw copper collapse yesterday, and that might have kicked off the big move to the downside that eventually recovered. This is a horrific-looking candlestick. If it prints anything close to what it looks like right now, I think this is a bad sign.
It doesn't mean the end of the uptrend, but what it does mean is that you can't simply jump in and throw money at gold like you have been able to for weeks. This is healthy and quite frankly, I think it's been needed for a while.
Top Regulated Brokers
Ultimately, I suspect we have further to go and then we look for stability followed by a small bounce. And that, of course, could open up the possibility of chasing some type of bounce and following the momentum. That being said, I do not want to short this market, but it certainly has brought people back to reality and I suspect a lot of retail accounts are now empty as a result.
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