The gold markets initially fell during the trading session to drop below the $1900 level, only to turn around and rally again. We have closed towards the top of the range, so that in and of itself is somewhat bullish; but at the end of the day, this is a market that has to make some type of decision, perhaps after the jobs report that comes out on Friday.
As things stand right now, I do not have any major interest in trying to put a lot of money into this market, but I think that longer term, people are going to continue to look at the gold market as a way to deal with inflation. Inflation certainly seems to be one of the biggest drivers of trading recently, this numbers have most certainly shown inflation to be a strengthening condition, not a weakening one. At this point, the market is likely to see a lot of back and forth action in this tight range that I have drawn on the chart, so I think that if you are a short-term trader, you will probably continue to go back and forth and play the range-bound situation. However, if you are looking at a bigger trade, it is a bit murkier.
At this point, if the market broke down a bit, it is likely that we could go looking towards the $1850 level, possibly even the downtrend line, as the 50-day EMA is reaching towards it. That for me is the “floor in the market” that we are currently looking at, and if we were to break down below that level, it is likely that the market would go much lower. However, I do not think that is likely to happen anytime soon, as the inflationary bid continues to pick up. If we can break above the highs of the last several sessions, then it is likely that the market will go looking towards the $1950 level. That is an area that has been resistance a couple of times in the past, so I think it is going to take a significant amount of momentum to finally break through there. Perhaps the jobs report might be the excuse, but at this point it is still a range-bound situation from what I can see, perhaps trying to digest some of the recent gains.
