The gold markets have done very little during the session on Monday, as we continue to go sideways overall. We need to decide whether or not we are going to see more sideways action, or perhaps even build a base to go higher. After all, we are just above a significant area of interest, in the form of the $1900 level.
If we were to break down below the $1900 level, then I believe you have to look at it through the prism of a potential trend change. In fact, you could even make an argument for a potential complex head and shoulders breaking down if that were to happen. The measured move would be rather drastic, perhaps down to the $1650 level. While I do not necessarily see this market doing that, the reality is that a move below the $1900 level would be very negative regardless.
On the upside, the $1950 level is a significant amount of resistance just waiting to happen, and if we can break above there then I anticipate that the gold market will attempt to try to break above the $1970 level. Clearing that level then opens up the possibility of going to the $2000 level above, which is a large, round, psychologically significant figure. Breaking above that level then opens up the possibility of a move to the $2050 level.
It is worth noting that the 50 Day EMA sits underneath at the $1908 level, which is dynamic support as well. I think at this point we will probably need to figure out which direction we are going next to start to put money into the market, so the next $50 will more likely than not continue to be difficult. Ultimately, you need to pay attention to the bond market as well, because if we see interest rates continue to climb the way they have, and perhaps rather quickly, that could work against the value of gold itself. On the other hand, if we see a rush back into bonds, we may see gold rally simply due to the idea of a safety trade. The candlestick for the trading session on Monday is somewhat neutral, so you should keep in mind that the market is going to go back and forth overall.
