Gold has crashed on Tuesday as the markets are seeing a strong US dollar overall, and as a result, the market has tested a major region.
Gold (GC)
Gold has been absolutely clobbered during trading on Tuesday as the US dollar has jumped pretty significantly. Quite frankly, I think we are looking at the possibility of a double top forming just below the $5500 level, but it is a little early to call that. After all, we had seen a nice rally after that huge wipeout candle several Fridays ago.
If we break down below the $5000 level, then I think things might get a little bit ugly here and it could have a little bit of follow-through to the downside. Short-term rallies, if you are nimble enough, might be able to be bought, but I suspect the first signs of exhaustion are you have to get out of this market.
Potential Double Top and Critical Support Levels
The US dollar strengthens the way it will continue to put a little bit of pressure on gold. But I think, generally speaking, a lot of what we are looking at right now comes down to the fact that people are selling what has made money to raise liquidity.
The question then becomes whether or not money flows back into safety assets such as gold. Ultimately, if we can break above the $5500 level then we could go looking at the $6000 level. If we break down below the $5000 level, we have plenty of support at $4800 and $4600 that I think both areas could be of interest. All things being equal, I think this remains a buy on the dip market, but you do not try to be a hero here. You need to have the market stabilize before you risk any of your trading capital.