Gold markets rallied quite significantly on Friday, slicing through a fair bit of resistance. We have sliced through a downtrend line, the $1810 level, and now it looks like we are running towards the $1835 level. It is at this point where the trend changes completely. Yes, I know we are above the 200-day EMA, but I would also point out that the 200-day EMA happens to be relatively flat. In other words, there is not a whole lot going on from the moving average standpoint.
Regardless, if we can break above the $1835 level, then I believe gold could go racing towards the $1900 level. A lot of this could come down to what happens with bond yields, which has had its influence felt as of late. Furthermore, it could also have a lot to do with what happens with the US dollar, which did suffer at the hands of better-than-expected jobs numbers on Friday. After all, if there is a rush into further parts of the risk spectrum, then the US dollar is almost always the first thing to go. Furthermore, you have to pay close attention to the fact that the gold market was closing at the very top of the range for the session, which typically means there is a bit of follow-through to come.
Beyond all of that, you also have to keep in mind that the market was willing to close at the top of the range going into the weekend. That is even more bullish than going home long at the end of a normal session. This means that people are willing to sell on gold over the next couple of days, when it could very well gap against them on Monday. In other words, gold looks very strong. This does not necessarily mean that we will break through the $1835 level easily, but it most certainly looks as if it is going to be challenged sooner or later. Pullbacks at this point should be thought of as buying opportunities, at least as long as we can stay above the 50-day EMA, currently sitting at the $1784 level. This has been a very strong turnaround over the last 48 hours, as it looks like the markets have finally decided which direction they want to go.
