The reading of 5% year-over-year of course was very hot, and ultimately was hotter than anticipated. Because of this, people are starting to wonder about inflation again, and therefore gold got a bit of a boost as a result.
As you can see, it was initially very negative, but we ended up right around the $1900 level, and perhaps even more importantly at the top of the range for the day, which typically means that we will continue to see some type of follow-through. That being said, gold does have a significant amount of resistance just above that has to be paid close attention to as well, so I would not necessarily be a buyer until we can break out above the most recent high that the market form last week. If it did, then I think gold has a real shot of going to the $1950 level, which is an area that previously had been resistance. If we can break above that, then the market is likely to go looking towards the $2100 level, which is an area that had kicked off a lot of the selling that we have seen until the last couple of months.
One thing I think you can count on is that we will have a lot of noisy trading ahead of us, and therefore it is likely that the market will probably continue to be one that you will have to focus on short-term charts, but do not forget to keep an eye on these longer-term charts as they can give you a bit of a guide as to where to go overall.
When you look at the area underneath, the $1850 level offers support, but then again so does the 50 day EMA which is coming right along it, and then the previous downtrend line that sits just below it as well. With all of that being said, the market is likely to find plenty of support in that region, so I do not necessarily have a thought of shorting this market, at least not yet. If we break down below the 200 day EMA, that might be different, but we have a long way to go before that happens.
