Ultimately, the gold market has demonstrated a tendency for volatility, requiring careful consideration of position size.
The gold market started Monday's trading session with an attempt to rally, but these gains were swiftly given up. Currently, it appears that the market is poised to decline towards the 50-Day Exponential Moving Average. From a technical analysis perspective, the 50-Day EMA holds the potential to provide substantial support, and it is increasingly probable that buyers will soon step in to capitalize on the opportunity to acquire gold at a lower price. Nevertheless, it is imperative to monitor the erratic behavior within the bond markets, particularly focusing on the yield emanating from the 10-year note in the United States.
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In essence, this market exhibits an exceptional level of volatility, making determining the size of your position one of the most important things. The 50-Day EMA not only serves as a support level but also warrants attention to the underlying previous uptrend line, in addition to the 200-Day EMA situated beneath, which also acts as a source of support. Consequently, it appears that the resurgence of buyers is imminent. However, before deploying capital, it is advisable to wait for a rebound in the market or a reversal that surpasses the critical $2000 level.
Be Careful With Position Sizing
- The appearance of a shooting star during the Friday session marked the onset of the first indications of overextension.
- As a result, it is likely that profit-taking is currently underway.
- All factors considered, it is conceivable that the market will eventually strive to surpass the $2000 level, potentially paving the way for an ascent to the $2100 level.
Expectations of volatility should not come as a surprise since gold frequently exhibits such behavior. In light of this, it is prudent to anticipate a landscape characterized by fluctuations. Notably, I hold no inclination towards adopting a short position in this market. My rationale for this stance is anchored in the belief that it is merely a matter of time before market participants begin to view gold as a safeguard for wealth preservation. Furthermore, it may serve as a hedge against the weakening of the US dollar should the greenback continue to lose its strength.
Ultimately, the gold market has demonstrated a tendency for volatility, requiring careful consideration of position size. While short-term fluctuations may occur, the overall trajectory appears to favor an eventual ascent beyond the $2000 level. The market remains a potential safe haven and an alternative to counter the depreciating value of the US dollar. Keep an eye on the 10 year yield as well.