Gold markets have gone parabolic during the session on Thursday as the markets slammed into the $1900 level. That being said, one of the biggest problems that we have now is that gold is behaving irrationally. We are clearly moving on the latest headline coming out of the Russia/Ukraine tensions, which of course is nothing but political gamesmanship. As long as the market is willing to play this game, gold is going to be an extraordinarily dangerous place to be. Quite frankly, if you did not get in on the move as soon as it happened, or probably sweating the whole time if you bought on Thursday.
That being said, a pullback would make a certain amount of sense, but what I am concerned about is that suddenly there are signs of a diplomatic solution, or at least hopefulness. If that is the case, gold will fall apart almost immediately as that is most of what has driven this market over the last couple of days. While I do think that there are inflationary arguments to be made in favor of gold, the last couple of days has had nothing to do with the economy, and everything to do with Russia.
The size of the candlestick does suggest that we would continue higher, but we are reaching a major barrier and are overbought by almost any account. Because of this, I would choose to be very cautious at this point, as no matter what you do you are going to be exposed to serious risk because of the games being played. There are false announcements on Twitter, blurbs and headlines, and everything else that is causing a run of algo trading. Because of this, nothing can truly be trusted in the short term. The market does look overbought so I would anticipate a bit of a pullback in order to find more buyers.
