Gold markets were steady on Monday as it was Martin Luther King Jr. Day in the United States, which wiped out quite a bit of the liquidity. Because of this, the market went back and forth on Monday, as there was not enough in the way of momentum out there to push things around. That being said, it is worth noting that we have held the same support level over the last couple of days at the $1815 level. Because of this, it is very likely that we could see a situation where we simply bounce around in the overall noise of the last four days.
We have to pay close attention to the behavior on Tuesday, because it could give us a little bit of a “heads up” as to where we are going next. You could make an argument for a little bit of a bullish flag, based upon the last couple of weeks, but at the end of the day you also have to keep in mind that we are still very much stuck in the same consolidation area that we have been in, so I think it is reasonable to keep this in the back of your head and suggest that the $1830 level is going to be very difficult to break. If we do break that level, then it is very likely that we could go higher.
To the downside, if we were to break down below the $1815 level on a daily close, that will probably send this market down to the $1800 level. The $1800 level has a certain amount of psychology attached to it, and we have the 200 day EMA sitting in that general vicinity, right along with the 50 day EMA which just started to turn higher. Because of this, if the market were to reach down towards that area, I think there could be a lot of noisy behavior. If we break down below there, then the $1775 level will be a major support level that could be targeted. A breakdown below that level would open up massive selling in the gold market, perhaps sending it much lower. That being said, I do not see that move happening very easily.
