Gold markets rallied significantly during most of the trading session on Wednesday, reaching towards the $1830 level. This is an area that has been a massive resistance barrier previously, and one that has held up quite nicely over the last couple of months. Keep in mind that the US dollar got absolutely crushed early in the day, only to turn around and show signs of strength as Federal Reserve Vice Chair Richard Clarida sounded just a bit more hawkish than a lot of traders had anticipated, suggesting that there would be interest rate hikes as soon as 2023.
Whether or not that is true, it is a bit difficult to stomach the idea of the Federal Reserve showing any signs of clarity, because it has struggled to show any signs of certainty, especially as the market will have to decide whether or not there is any real chance of tightening. That is almost impossible, but at this point the bond market continues to yank the gold market back and forth.
The candlestick for the trading session ended up being a shooting star, as we are hanging around the 50-day EMA and the 200-day EMA. Both of those EMA indicators are going sideways, so it makes sense that the market really has nowhere to be. As you can see, I have marked on the chart a consolidation area between $1830 and $1790. The market is trying to break out, but as soon as Clarida made those comments, the gold market got absolutely hammered. The US dollar picked up strength against multiple currencies as well, so it makes sense that we ended up where we had started, meaning that the gold market was essentially unchanged.
If we were to break out above the highs of the trading session, the market could go looking towards the $1860 level, which is the top of the gap that still remains on the chart. On the other hand, if we were to break down below the $1790 level, then it is likely we could go looking towards the $1750 level, as it is an area that people continue to pay close attention to as far as support is concerned. With the jobs number coming out on Friday, it is likely that we will continue choppy behavior.
