Gold markets initially pulled back just a bit on Tuesday only to turn around and show signs of life again. The $1835 level above has been significant resistance, and think it is worth paying close attention to this market going forward. The $1835 level being broken above would be a significant breakout just waiting to happen. In fact, at that point I suspect that gold would essentially be a “buy-and-hold” type of situation.
I believe that short-term pullbacks continue to show signs of support underneath, especially after the price action that we saw on Tuesday. I had anticipated that we may stall here, and we still could, but at this point it looks as if there is a significant attempt to push this market higher. I think the next couple of days should give us a “heads up” as to where we are going longer term. If we can break above the resistance barrier, I anticipate that gold will go looking towards the $1900 level. I do not necessarily think that we are in a scenario where we are suddenly going to melt up, but I do think that we will probably see more of a “buy-and-hold” situation if we do take off to the upside.
On the other hand, if we turn around and break down below the $1800 level, I think that could be the end of the gold bullish run, at least for the short term. At that point, we could probably go looking towards the $1750 level, perhaps dropping even further than that. Pay attention to the yields in America, because if they start to pick up again, that will work against the value of gold as well, as it offers a “real yield”, something that gold is supposed to protect against.
Looking at this chart, it certainly looks as if we are going to try to make a major breakout. If we do get that daily close above the $1835 level, then it is very likely that we could see a lot of money flowing into this market. Regardless, in the short term, it does look a little bit stretched, so it is because of that reason that I am not willing to jump in and start buying right away, despite the fact that it does look a bit strong at this point.
