The gold market has jumped nicely on Tuesday, as we continue to see plenty of interest in the metals sector. Ultiamtely, this is a good sign, but also a dangerous one.
Gold Futures
The gold market has broken quite a bit higher during the trading session here on Tuesday and it now threatens to break above the $5,000 level. The market is doing exactly what I would not want to see it do. You do not want to see a massive meltdown, a wild day and then a massive turnaround. While that does look strong, what it shows is a lot of instability. Instability breeds more chaos, the more chaos out there in the markets, the more likely it is that people will get hurt.
So, while I do believe that buying gold is really the only way you can do this, and I certainly do not want to short the market, it is a situation where you are looking for a little bit of stability and maybe a couple of days of sideways action and then some momentum. You need the market to come back to reality and right now, it is obvious that gold markets are just being kicked around like a soccer ball.
Analysis and Market Outlook
Ultimately, this is a market that I do think is looking to the highs again, but you really want to see it take its time getting there. A nice strong uptrend is much more preferable than what we just saw because you got so overbought that the massive crash on Friday quite frankly should not have been a surprise, it is just you never know when that is going to happen.
All things being equal, I do believe that the $4,400 level is now the floor in the market, although we are already $600 above there. I like buying dips on short-term charts that show signs of a recovery.
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