Gold markets initially sold off on Wednesday but then turned around to show signs of life again as we broke above the $1810 level. That being said, the market continues to see a lot of noisy behavior, so I think you are going to have to be cautious with your position sizing. Regardless, I still favor the upside simply because we have more room to run to the upside than the downside. The downside has a lot of support at the $1780 level, and we need to pay close attention to that, but the $1830 level above is the most likely of resistance barriers, as it is the top of the gap.
Keep in mind that gaps are typically filled in the futures markets given enough time, so that might be what we are trying to do at this point. If we break above the highs of the day, it is likely that we could go higher, but I would suggest that you are probably better off trading the CFD markets because you can trade smaller positions in order to ride out the volatility that almost certainly will be part of this market. Keep in mind that the US dollar is negatively correlated to the gold market most of the time, so if the US dollar suddenly spikes a lot higher, that could work against the value of gold. Furthermore, you have to keep an eye on the 10-year note: if the interest rates start to spike, that could cause quite a bit of negativity as well. However, the exact opposite of course is true.
The $1780 level has been rather important multiple times, so if we do break down below there, I think we might see an acceleration, perhaps a much quicker move then we would to the upside. If we can break above the $1830 level, then it is likely that we could go to the $1850 level over the longer term. In general, this is a market that will continue to be noisy, so the most important thing that you can do is be cautious with your trading position and your trading account. Gold is more than likely going to be a very noisy and dangerous market, especially as we have two central banks on Friday meeting, and then the jobs number.
