The gold markets initially pulled back during the trading session on Friday but then turned around to reach towards the major downtrend line that I have been following for the last week or so. The $1850 level also offers a significant amount of resistance, which has been important more than once. If we can break above there, then the market is likely to continue to go higher, perhaps reaching towards the $1950 level. That being said, I need to see a daily close above that level as a signal to start going long. At that point in time, I would not only get bullish, but I would get aggressively so.
On the other, it is likely that we could pull back and reach towards the $1800 level, possibly even the 200 day EMA underneath at the $1794 level. The 50 day EMA is starting to reach towards that region, perhaps getting ready to form a bit of a buying signal as it is known as a “golden cross.” Those moving averages both attract a lot of attention, and therefore a lot of buyers would probably jump into this market as it tends to offer support. However, if we were to break down below that level it is likely that the market could go looking towards the $1750 level, possibly even the double bottom underneath.
All things been equal, you should also pay close attention to the US dollar, because if it starts to fall apart that could help gold. At this point time, the market certainly looks as if it has quite a bit of buying pressure underneath, but if we were to break down significantly then we could open up the door down to the $1500 level. Furthermore, we should pay attention to the yields in the United States, because if they start to rise rapidly that could work against the value of gold as it has multiple times in the recent past. With this being the case, it is very likely that we would see choppy behavior regardless, and therefore I think you need to be cautious, but we could see a nice trade starting to open up rather soon. With this, I am looking for an impulsive candlestick to follow in one direction or the other so that we can play for a bigger move.
