Gold markets hesitated on Friday, as we were very choppy and essentially nowhere by the end of the day. Ultimately, this is a market that is trying to determine whether or not it has the wheels to go higher, but at this point, there seems to be a bit of a problem near the $1960 level. Longer term, I would anticipate that a break above that level could open up bigger moves, perhaps all the way to the $2000 level rather quickly.
The market has a significant amount of support underneath that extends down to the $1920 level, which begins the next major support zone. That zone opens up for a move to the $1880 level where I consider the trend to be supported completely. A move down below that level would be very catastrophic and would probably represent some type of massive surge in the US dollar.
At this point, one thing that you need to pay attention to is the 10-year yield in the United States. The yield is starting to spike, and sometimes that can work against the value of the metal, as it’s cheaper to hold paper than it is to store gold. That being said, there is so much in the way of uncertainty right now that gold does offer a certain appeal based upon that alone. Because of all of these moving pieces, this is going to be a very difficult couple of weeks.
That being said, you have to look at this as a market that is currently bullish, so I do not like the idea of shorting. I do believe that eventually, the buyers will return, so it is going to be difficult to imagine a scenario where we simply fall apart. Ultimately, this is a market that I think needs to at least attempt the $2000 level, but the question is how we get there. It is probably going to be very difficult because we had recently seen such a parabolic move that a lot of people are questioning whether or not we can build up momentum.
Looking for value will more likely than not be the best way to play this market, as there should be plenty of pullbacks so give us the opportunity. You will probably need to focus more on short-term charts for entries than anything else at this point.
