Gold markets fell initially during the trading session on Friday, just as we did on Thursday. However, the buyers came back just as we did the previous day and formed a hammer again. That’s a very bullish sign the fact that we have “dual hammers” sitting just above a major support level near the $1280 handle. However, there is a certain amount of significant resistance just above in the form of $1300 as it is a large come around, psychologically significant figure, and of course the 50 day EMA is sitting right there.
Just below the $1280 level, we have the 200 day EMA which is hovering around the $1275 level. That’s an area that of course will be very crucial for algorithmic and technical traders. As we are between the two most commonly used EMA indicators, it’s very likely that to continue the choppiness but for me it seems that the buyers are much more aggressive.
If and when we break above the $1300 level, I believe that the market will then go looking towards the $1325 level. That was the most recent high, so breaking above there would be a bullish sign and a continuation of the longer-term uptrend. After that, I would be looking at the $1350 level. With central banks around the world looking to get looser than anything else, it should continue to support precious metals in general, especially now that the Federal Reserve looks likely to step away from anything close to tightening monetary policy.
At this point I put a move higher as about 80% likely, based upon the fact that we had to hammers in a row print. That is typically a very strong signal, but nothing is 100% accurate. Because of that, your typical money management will be crucial.
