The gold markets got crushed during the Friday session as we have taken back almost all of the gains from Thursday. That being the case, the market looks as if it is still going to respect the overall consolidation that we had been in for some time, between the $1790 level and the $1830 level. The market is trying to close out somewhere near the $1810 level, which is essentially halfway, meaning that even though we have seen a lot of volatility during the week, nothing has been settled.
The 200-day EMA currently sits at the $1800 level, which is just as good as having a round figure there also, so in other words, I think that this is going to continue to be a bit of a magnet for price. Next week should be interesting, because if we break down from here, we will test that $1790 level again, an area that has been rock solid. If that gets hammered through, all bets are off as gold will probably collapse. In that scenario, we could very easily see the market go looking towards the double bottom near the $1680 level, and then possibly down to the $1500 level after that. That would almost certainly show extreme US dollar strength, which at this point is still very possible considering that we had seen such a massive turnaround late on Friday in the greenback against multiple currencies.
On the other hand, we could turn around and take out the highs of the week, perhaps opening up the possibility of a move to the $1860 level. That would be quite a feat, considering that Friday was so ugly. But if it happens, then filling the gap obviously would be something that a lot of people would be aiming for. After that, we could be looking at a move towards the $1910 level over the longer term. Either way, this market is about to get really interesting, but we are still stuck in a range from everything I see, so that extraordinarily bullish candlestick on Thursday seems to have meant nothing by the time it was all said and done. At this point, you can see why I have been talking about how you should keep your gold positions relatively small until we get a little bit more in the way of confirmation.
