Gold markets fell a bit to kick off the trading session but then turned around to show signs of resiliency as the $1750 level has offered support. This is an area that has been rather nasty resistance in the past, and the fact that we broke above there and have now returned to test that area for potential support does bode well, but we have looked rather soft over the last several weeks, and as a result, it is difficult to imagine a scenario where I become extraordinarily bullish.
If we were to break down below the $1750 level, the market will more than likely go looking towards the double bottom near the $1680 region. That for me is the longer-term floor in the market, but if we were to break down below that double bottom, then I think the market will fall apart and go looking towards the $1500 level. This is a market that looks extraordinarily vulnerable, so we could see this market fall apart based upon the most recent price action.
On the other hand, if we were to turn around and take out the top of the candlesticks from last week, then the market is likely to go looking towards the 200-day EMA, perhaps even towards the top of the gap which currently sits at the $1860 level. Breaking above that, the market would go looking towards the $1900 level, perhaps even followed by the $2100 level, which is where the recent highs were made in the last year or so. This would bode right along with the idea of the US dollar falling, but that is not likely to be the case at this point, so it is possible that we could break down based upon that reasoning alone.
Yields in America are dropping, which shows you that most people are looking to put money into the bond market despite the fact that they are not offering much in the way of yields. Because of this, the US dollar seems to be elevated, and as long as that is going to be the case, gold will continue to fail to pick up any type of momentum. Ultimately, pay close attention to the US dollar and the bond market, because if they both strengthen, there is almost no way whatsoever that gold will do the same.
