Gold markets have fallen rather hard during the trading session on Tuesday to break down below the $1970 level. That was an area that had been significant resistance previously, and therefore it is a bit surprising that we sliced through it as easily as we did. The market still has plenty of support underneath that could come into the picture, and it is worth noting that we had previously broken out of a consolidation area.
The market also has the 50 Day EMA sitting at the $1925 level, and of course, going higher. Because of this, the market still has plenty of buyers between here and there to lift this market. If the market were to find some type of supportive candlestick between here and there, then it is likely that we could reenter the market to the upside. I do believe that the market continues to go higher over the longer term, as there are so many reasons to think that people will be looking for some type of safety.
If we do rally from here, the $2000 level is an area that has offered quite a bit of resistance previously and is a large, round, psychologically significant figure. The market will then try to decide whether or not we can continue to go much higher, perhaps reaching the $2050 level. At this point, the market continues to see a line of value hunting, and that of course is a big part of what is going on in the long term. It is not until we break down below the $1900 level that I would consider shorting this market, and even then, I would be a bit cautious about shorting until we saw a weekly close below that level.
At that point, then it is very likely that the gold market goes looking toward the 200 Day EMA, which is currently at the $1850 region. The market at this point could break down even further, but I still believe that this is a market that has more upward momentum than downward and of course more things to drive people into the risk asset part of this market than anything else. The candlestick is rather long, but we are not closing all the way at the bottom of it, so I think that shows that there is still a fight left in this market.
