Gold got absolutely crushed during the Friday session as we continue to see the interest rate markets have a major influence on what happens next with metals and of course gold is an extraordinarily sensitive metal when it comes to the idea of interest rates climbing or falling for that matter.
With interest rates climbing in reaction to the jobs number coming out at twice what was expected on Friday, gold got really hammered hard as rates jumped back towards the 4.55% level on the 10-year note. That being said, if rates start to roll over again, then we have the opportunity for gold to perhaps rally a bit, maybe clearing the 200-day EMA.
Technical Outlook and Key Levels to Watch
It looks like we are in fact going to close the day heading into the weekend with extreme negativity and that generally means that we will see some type of follow-through, but we have to be very cautious. All things being equal, the market breaking down from here could open up the possibility of a drop to the $4200 level, but as things stand right now, I think this is a situation where you're probably better off just simply waiting to see what happens next.
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I would not try to anticipate a bounce, nor would I try to jump in right away and start selling aggressively. Monday's candlestick should give us a lot of information by the close of business. Perhaps it ends up being a hammer. If that's the case, then I'm probably more inclined to buy the bounce. If we break down again on Monday, this could be the beginning of something much bigger.
The clues will be in the 10-year yield. Somewhere around 4.5% there seems to be a flip between bullish and bearish with risk assets, so pay close attention on Monday. This could be a very interesting market.
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