The gold markets rallied a bit on Wednesday, as we continue to hang around the $1800 level. It is also worth noting that the 50 day EMA and the 200 day EMA both sit there and are going flat. With this being the case, the market is likely to see a lot of noisy behavior, but I still see a massive amount of resistance above those moving averages. The $1820 level above is a massive amount of resistance, and we have formed a bit of a “double top.”
To the downside, the $1760 level is the bottom of the overall range, and I think we are going to bounce around between here and there for the next two weeks. I would be a bit surprised to see this market break out of the range between now and New Year’s Day, because the later we get into the week, the less volume we will have. Furthermore, next week will be anemic as well. In other words, you need to be very cautious, so I would think at this as a consolidation but look at it through the prism of smaller trading.
Ultimately, this has been a nice move during the trading session on Wednesday, but still has to deal with long wicks above, so I do think that it is only a matter of time before we fall right back down. We did close towards the top of the candlestick, closing at the highs. With this being the case, it looks like we probably have a little bit of momentum, but I do not necessarily think that it means we are suddenly going to go racing towards the $1875 level.
The US dollar will have its say as usual, and you need to pay close attention to the US Dollar Index. The dollar has been back and forth as of late, so it does make a certain amount of sense that we have the same behavior here in the gold market. I do not think that you should be putting too much money into this market but if you are willing to trade small positions in a range bound back-and-forth type of situation, gold might be a good situation for you. I would not get too aggressive regardless of what happens.
