Gold markets initially shot higher on Tuesday, and after that we were getting ready to take off to much higher levels. However, right around 9:30 New York time, there was this huge dump of orders over the course of 15 minutes that completely changd the look of the market. This shows just how weak this rally has been, despite the fact that it looked really strong. The fact that we're forming a shooting star suggests that we probably have a little bit of a pullback coming, and at the very least I think that is what you would expect. The 50 day EMA and the 200 day EMA both sit right around $1800 level, so a pullback to that area seems to be kind of a given. I would expect that somewhere around there you should see a certain amount of support and buying pressure, so it would be interesting to see whether or not we can hold again. If we cannot, then it is likely we will go looking towards the $1775 level.
Looking at this chart, I think we are trying to build up enough momentum to finally go higher, and if we can break above the highs from the Tuesday session, it is very possible that we could go looking towards the $1850 level. After that, then we would be looking at the $1875 level, which of course is an area that has been very noisy in the past. On the other hand, if we were to turn around and break down below the $1775 level, then we really can start to unwind and go looking towards the $1750 level. That is not my base case scenario, but it is something that we have to be aware of as being a possibility. Right now, it looks like we are forming a bit of a “rounding bottom”, but that is not confirmed, at least until we break out to the upside. One thing is for sure: the next couple of several sessions are probably going to be very choppy and noisy, so I would not put huge positions into the market, as the closer we get to New Year’s Day, the more illiquid the markets will become, and you can get crazy slippage out of the blue, perhaps part of what we had seen during the day on Tuesday.
