Gold markets went back and forth during the trading session on Friday as we try to digest some of the gains that we have seen as of late. By doing so, the market looks likely to see a bit more sideways action, which is a good thing, considering that we just broke through a major resistance barrier. We have the downtrend line that I have drawn on the chart, and then the $1850 level. Both of those being broken is a good sign for the buyers, and the fact that we even pulled back to test that area for support and had it hold is a good sign as well.
If we can break above the $1900 level, then it is possible that we could go looking towards $1950 level above, which is an area where we had seen selling multiple times. Nonetheless, one could make an argument for a simple “buy on the dip”-type of scenario as the US dollar seems to be under severe pressure, and this most recent breakout has been rather stringent. At this point, the $2100 level is a possibility, as it was the most recent high that we had seen over a year ago.
I know that it has been very difficult on gold for a while, but at the end of the day it is still very much in an uptrend. This could be further reinforced due to the fact that the 50-day EMA is going to cross the 200-day EMA, which suggests the so-called “golden cross” that people look at as a longer-term trade signal. I am a buyer of dips until I see some type of breakdown below those moving averages. Currently, they sit at the crucial $1800 level, which is an area that has been important more than once.
Pay close attention to the US dollar, and how it is behaving. If the US dollar starts to fall off again, that could help gold markets go higher as well, as the negative correlation typically holds up over the longer term. This will also be boosted by any significant drop in interest rates, but I do not think you can hold your breath waiting for that catalyst itself.
