The market will continue to pay close attention to the US dollar, and of course interest rates because they have such a huge negative correlation to gold.
- Gold markets have pulled back just a bit during the trading session on Monday, dipping below the 200-Day EMA before turning around and showing signs of blank again.
- By forming a hammer-shaped candlestick, it sets up a bigger move.
- We can either break to the upside and are looking to the $1800 level which is the next major area of previous support and the fact that it is a large, round, psychologically significant figure.
On the other hand, if we break down below the bottom of the candlestick, then it’s likely that we could go down to the $1725 level. After that, we have a potential “hanging man” if we break down below the bottom of the candlestick, and of course, we would not only break down below that candlestick but break down below the 200-Day EMA as well. All things being equal, that would of course be a very negative turn of events. It would not be a huge surprise to see that, because it is a bit overstretched at this point, so it could use a little bit of a pullback.
Pay Close Attention to the Greenback
The market will continue to pay close attention to the US dollar, and of course interest rates because they have such a huge negative correlation to gold. It is possible at this point that we would see at the very least some consolidation, so I would be a bit concerned if we shot straight up in the air since overbought markets tend to get wrecked.
There have been some rather large gold orders as of late, so the question is whether these big players are done at this point. If we do break out to the outside, then we could look at a move all the way to the $2000 level based on historical price action. I think we are going to continue to see a lot of stomach-churning volatility because quite frankly the Federal Reserve claims it is not done slowing down the economy. If rates continue to rise, in other words, if people believe the Federal Reserve, then we’ll see gold sold off quite drastically. On the other hand, if people choose to continue to ignore the Federal Reserve, we could see gold take off quite rapidly. At this point, it’s just a game of drama.