Gold markets gapped lower to kick off the trading session on Thursday to show a massive amount of negative pressure. At this point, the market then broke down below the $1800 level, as well as the 50 day EMA and the 200 day EMA. All things being equal, the market has sliced through these moving averages quite easily, and that does show some negativity. However, the moving averages are sideways and therefore it suggests that the market could go back and forth in general.
It is likely that the $1780 level underneath should be supportive, and something that we need to pay close attention to. That is an area that defines the bottom of the overall trading range, so you need to keep that in mind. The $1780 level should offer a little bit of buying pressure, so will have to see how that plays out on Friday, as it could be important. However, if we sliced through that level, it is likely that we go much lower, perhaps reaching towards the $1750 level eventually.
Keep in mind that the Federal Reserve tightening its monetary policy will have a certain amount of influence on not only the US dollar, but also the gold market, as it has a knock on effect. Another thing to pay attention to is what interest rates are going in America, which of course can work against gold if they start to rally too much. This means that paper becomes a little closer to a real return, and therefore why would you pay significant money to store gold? With that being the case, I would anticipate a lot of volatility, and therefore I would keep my position sizing rather small but would build if the market starts to move in my favor.
I would anticipate a lot of choppy behavior, and therefore your monetary position should be of paramount concern. Given enough time, we should see quite a bit of opportunities, perhaps more to the short-term side than anything else. We are still technically looking somewhat bullish, but after the bearish pressure that we had seen during the last couple of days, it is more of a tossup than it once was. The gap above still needs to be filled, so I think is probably only a matter of time before we see that happen, but do not overleveraged yourself is the key take away.
