The gold markets have gone back and forth during the course of the trading session on Thursday, as the 50 day EMA above continues to offer a bit of resistance. Because of this, I think the market will continue to see a lot of choppy behavior, especially as the US dollar is starting to pick up strength, which of course works against the value of the gold markets, as the two have negative correlation most of the time. (Having said that, it should be noted that it does not necessarily have to be that way.)
The 50 day EMA has offered resistance, as the last three days have shown, and as a result it is very likely that we could get a little bit of a pullback. If we break down below the bottom of the candlestick during the trading session on Thursday, then it opens up a move towards the $1750 level. Breaking down below that level then would open up the possibility of a move down towards the $1680 level, which has been massive support at least three times. Breaking down below that level would of course open up a move down towards the $1500 level.
To the upside, we would need to break above the 200 day EMA in order to get long, and at that point in time it would be a continuation of the bullish hammer that formed during the previous week and could open up a move towards the $1830 level, perhaps even breaking above that to go towards the $1910 level. That would obviously be a major change in attitude, despite the fact that we have seen a massive bounce until the last three days. I think because of this, we will see a lot of noise when it comes to the gold markets, and you should pay close attention to that.
Looking at this chart, I think we are going to see a pickup in volatility, as the market is trying to figure out the inflation/deflation debate, which still seems to be split down the middle when it comes to analysts’ expectations. As long since going to be the case, it is very likely that we will go back and forth until we get some type of sign of clarity. The Federal Reserve is in fact going to taper, it could offer higher interest rates in America which means that people will be much more likely to hold paper than they will get involved in storing gold.
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