The gold markets initially drifted lower during the course of the session on Friday but found plenty of buyers as we head into the weekend. Ultimately, a lot of people are concerned about the Russia/Ukraine situation, and that could continue to come into the picture going forward, as people may be looking to get into the gold markets in order to protect themselves from risk. Furthermore, inflation has been a major situation that has been driving gold higher. It is worth noting that the $1900 level is an area that makes a certain amount of sense as being resistance.
Speaking of resistance, it is probably worth noting that the area that we are and right now was a previous consolidation area between the $1880 level and the $1920 level. It is not until we break above the $1900 level that the market could truly take off. We are parabolic right now, so it will be interesting to see how this opens up on Monday because we could see a massive drop if tensions back off in the Ukrainian border. That being said, the market has inflationary concerns to worry about as well, so even if we do get some type of bigger pullback, that is not necessarily a sign that we are going to meltdown.
What would be interesting is the fact that breaking down below the bottom of the candlestick for the trading session on Friday, then it could be considered to be a “hanging man”, but I do not think that is a signal that I would be overly concerned about unless we sell off. Having said that, if we were to break down below the massive candlestick on Thursday, that might get me a little bit short of this market, but I do not necessarily think that we are going to see that move. In fact, it is also possible that we could see a massive breakout if the Russians do in fact crossed the border into Ukraine.
If the US dollar strengthens, that might slow things down, unless of course it is a huge flight to safety due to an armed conflict. The one thing I think you can count on is a lot of noisy trading, so keep your position size relatively reasonable until we break out of this $40 range that we are trying to test.
