The gold markets were very noisy on Wednesday as you would anticipate, due to the fact that it was the FOMC meeting and everything that goes along with that. That being said, the market is going to be very volatile due to the fact that the US dollar will be all over the place. This is a market that I think will continue to see a lot of concern as the $1830 level is an area that previously has been support and will be a bit like a magnet. Whether or not we can hang above there is a completely different question, but if we do not then it shows that we have a pullback coming.
Looking at this chart, you can see that the market will continue to be very noisy, but I think it is also going to be difficult to navigate with any type of size. The market will continue to struggle with the idea of directionality, especially as inflation has been without a doubt one of the biggest concerns. Gold typically does okay during inflation, but it also has to worry about what we are going through when it comes to the idea of the US dollar all over the place as it is. On the other hand, if we do rally from here, we could go looking towards the $1850 level, and perhaps even break out above there. If we do break above there, then the market is likely to continue towards the $1875 level.
To the downside, if we break down through the $1800 level, then the market will go much lower. At that point, we would see a lot of downward pressure, perhaps crashing the market. That being said, this market continues to be noisy and you need to be very cautious about your position size more than anything else. Gold remains very thin at times, and it can be very difficult to deal with. I think the next few days could be very difficult, so you will have to remain nimble to say the least. The market will continue to see these sudden spurts of volatility as we are trying to figure out monetary policy going forward.
