Gold markets were quiet on Monday, which should not be a huge surprise considering that it was Memorial Day in the United States, and futures trading was somewhat limited. Because of this, I would not read too much into the candlestick other than that the market is hanging around the 200-day EMA yet again. We are in an area where the market will have to decide its next move rather quickly.
The 50-day EMA is above the $1875 level and dropping. Because of this, I think there is still a significant amount of technical pressure on this market, but ultimately, we have to determine where we are going next. Alternatively, this is a market that I think will have a lot of noise attached to it as the interest rates in America have been all over the place. Recently, they have been falling, but I think that traders are starting to jump into the bond market for safety, so I would not read too much into it. Because of this, a pullback is very possible, and if we were to break down below the $1850 level, I suspect that we may have to reset. The $1800 level underneath should be an area where a lot of support could be found, so as long as we stay above there, we have the possible making of a longer-term uptrend. However, if we give up that area, it could get ugly rather quickly.
If it moves like that, it would almost certainly have to do with the US dollar spiking and value. I do think that both gold and the dollar can rally, but it’s going to depend on global macro conditions. At this point, things look rather tenuous at best. If we can break above the 50-day EMA, that could kick off a huge move higher, perhaps sending gold to the $1925 level, maybe even the $2000 level over the longer term.
When I look at this chart, at the very least I would anticipate a bit of a pullback so that we can build up momentum and continue to rally. If we break down below the hammer that pierced the $1800 level, gold will fall apart and go much lower. In these types of environments, it’s very difficult to get overly bullish or bearish on anything with size. Make sure that you build up your position slowly.
