Gold initially rallied on Tuesday, as the markets are looking at the overall global situation through the prism of fear and caution.
Gold actually separated from the interest rate markets previously.
Gold initially did try to rally during the trading session on Tuesday to test the 200-day EMA, but we have fallen pretty significantly since then. The 200-day EMA offering a bit of resistance and breaking down below the hammer from the Monday session is a very negative turn of events. What's even more negative for me is the fact that interest rates started dropping and that didn't help gold. That's an interesting shift. We are starting to perhaps break out of that sort of negative correlation; we'll just have to see.
Market Pressure and Structural Weakness
But I think ultimately this is a market to see a lot of downward pressure, and we could go looking for the $4,100 level next. If we were to turn around and break above the 200-day EMA, then it opens up a possibility of a move to the $4,400 level, but I don't really think that is likely.
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Looking at this chart, I think we are clearly seeing structural weakness, and I believe at this point we really could start to see maybe an acceleration, we'll just have to wait and see how that all plays out at this point in time.
Pay attention to the US dollar, that could be a driver, but again, the dollar fell right along with gold, so interesting change of events here. Sometimes you just follow price. Price is telling you, at least in the short term, that the sellers are much stronger. Longer term, I still like gold, but we may need to have a significant correction and the next day or two probably tell us that.
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