The gold market as gone back and forth during the trading session on Tuesday, initially shooting much higher but giving up gains rather quickly as we approached the 50 day EMA, a technical indicator that a lot of people pay close attention to. After all, the 50 day EMA represents a quarterly move, and therefore a lot of larger firms readjust over that timeframe.
We have seen a significant sell signal recently, in the form of the so-called “death cross” as gold plummeted during the previous week. We almost wiped out the losses but have started to show signs of hesitation and turnaround, and because of this I think it is possible that we would see the markets perhaps drift a little bit lower, especially as the US dollar has been strengthening. If that is going to continue, that will almost certainly work against the value of gold as the two tend to be negatively correlated. Because of this, it is very possible that we could reach down towards the $1750 level, an area that I think if we break down below, then it is likely that we go looking towards the lows again. The lows of course being the $1680 level. If that were to happen, we are now testing major support level that has held up multiple times, and even formed a “double bottom” previously.
The market breaking down below that level at $1680 could open up a move down to $1500, perhaps as the US dollar would strengthen quite drastically. On the other hand, if we were to turn around a break above the 200 day EMA, ostensibly breaking above the top of the shooting star for the trading session on Tuesday, then it is very likely that the market will continue to go higher as we will have not only above a significant technical indicator but taking out a shooting star at the same time. Furthermore, we would have also gained back all of the losses from those two massive red candle six, which in and of itself would be a very bullish sign. Because of this, the market is likely to see a lot of noisy trading over the next couple of days, but ultimately it will be all about the US dollar at this point. The fact that we formed a shooting star it does suggest we could see a pullback in the short term regardless of what ends up being the case longer term.
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