Gold markets rallied on Wednesday to threaten a major breakout once again. We are not quite there yet, as the day seemed to be topping out near the $1870 level, and the major resistance barrier that we had been watching forever now is at the $1880 level. Because of this, it looks as if we are trying to build up the necessary inertia to make that happen. If we can, I anticipate that the gold market will more than likely go looking towards the $1900 level over the next several sessions.
Gold has been very volatile as of late, especially as we are seeing a lot of geopolitical tensions out there. The Russia/Ukraine problem has been positive for gold, as people are looking for some type of safety. Beyond that, we also have an inflationary environment which over the longer term should be good for gold as well. Given enough time, I do think that it is likely that the gold markets will not only rake above the $1880 level but go as high as $2100 based upon longer-term projections.
It is worth noting that there is a gap underneath that continues to be important. We did essentially fill that gap, but it could come into play on any type of breakdown. That would more than likely just offer more support going forward and offer a bit of value that people can take advantage of. That being said, if we were to break down below the $1840 level, then I would anticipate that we have further to go to the downside as it would be such an egregious break of potential demand.
Pay attention to yields in the United States, because if they start to spike again that could work against the value of gold, but quite frankly, I think we are just about done seeing the erratic moves. After all, we have already priced in something like five rate hikes by the Federal Reserve, which is something that most people that I listen to with respect do not think is possible. Growth will slow down significantly between now and then, and that could have the central bank turning its policy right around. Get ready, because markets are about to become quite volatile for most of the year. What we have seen over the last couple of weeks should continue well into summer.
