Gold markets were very choppy during March but are sitting on a major support level. At this point, traders are trying to figure out what to do next, because we had seen such a big move to the upside preceding this. Because of this, I think we will more likely than not try to figure out where to go next during the month of April.
This could lead to more choppy behavior, with the $1920 level in the futures market offering support. It should extend down to the $1880 level, creating a “zone of support.” I believe this area is going to be crucial for the longer-term uptrend, so as long as we can stay above there, gold will still have a chance to rally. However, you cannot overlook the fact that we had recently formed a major “double top” on the weekly chart, just below the $2100 level. This is a very negative turn of events but there are buyers just below, so I think we are about to get some type of squeeze.
What I mean by this is that the market could move rather rapidly in one direction or another. If we break down below the $1880 level, then it is likely that we could go down to the $1800 level. On the other hand, if we were to break higher from here, the $2000 level would be a likely target, and if we can break above there it is possible that we go looking towards the $2100 level.
Ultimately, this is a market that has been in an uptrend for plenty of reasons, not the least of which would be the fact that there is a lot of fear out there. The war in Ukraine continues to have people running for safety, but sooner or later people will start to determine whether or not the interest rates in the bond market are starting to outweigh the potential advantages of owning gold. This could be a major detriment to gold if it gets out of hand. It does look like we are more positive than negative, but the last couple of weeks have shown a serious deceleration in enthusiasm. Pay attention to the US Dollar Index, as it can offer a strong negative correlation as well.