The gold market rallied significantly during the trading session on Monday to kick off the week, reaching towards the 200-day EMA and even breaking above it at one point. However, we could not clear the $1800 level, so it tells me that we are still a bit hesitant to kick off a larger move to the upside.
The $1800 level is worth paying attention to, so if we can get some type of daily close above there, then I think that we could see gold continue to go much higher, perhaps reaching towards the $1850 level, possibly even the $1950 level after that. That being said, the market is going to continue to be very noisy, due to the fact that we have a lot of questions out there when it comes to interest rates, and whether or not the dollar is going to go higher or lower. The gold market does tend to move in the opposite direction of the dollar, but not always. It comes down to the reason why the dollar is moving.
Underneath, we have the $1750 level as a significant support level, so if we were to break down below there then I believe that the market probably goes looking towards the double bottom that recently had formed. If were to break down below there, then the market is likely to go looking towards the $1500 level, which is a large, round, psychologically significant figure. Furthermore, it is also an area where we had seen quite a bit of action in the past, so it would make sense that we would see a reaction to that figure.
In the meantime, I believe that the market is trying to figure out whether or not it can turn things around, and if we can continue to see yields in America drift a little bit lower, that should help this market go higher. It is very likely that we would see the market remain noisy even if it is very bullish and positive. With this, I think that you need to be a bit cautious about your position size, but perhaps only adding when we get a clear signal that we are ready to continue going higher. In the meantime, we are still squeezing between the two major moving averages.
