Gold markets initially try to rally on Tuesday, but as we have seen so many days in a row now, sellers have stepped in to push the market from the highs. At this point, gold is sitting at the $1820 level, and it looks very likely to go down to the $1800 level. The $1800 level has been supported multiple times in the past, and we have the major trend line from the longer-term charts showing up in that same vicinity. Furthermore, we have formed a “double bottom” near there as well, so it’s likely that we will continue to see buyers step in and try to pick up value.
Pay attention to the bond market in the United States, because those interest rates continue to rise, that’s going to work against the value and price of gold, which is exactly what we have seen recently. The candlestick for the day is a bit of a shooting star, so that does suggest further weakness. Whether or not we can break down below the $1800 level is a completely different conversation, but it certainly looks as if we are going to try to do so. If we were to do all of that, then it’s likely that the market will go looking to the $1750 level rather quickly.
If we turn around and rally, we would need to overcome the $1840 level, the potential “death cross” above there near the $1850 level, and then eventually the $1880 level which is massive support. Breaking above that would not only be a bullish sign, but it could open up the possibility of a move to the $2000 level after that. The $2000 level has a lot of psychology attached to it, and people will certainly stand up and take notice if we get to that area. After all, the financial media loves large, round, psychologically significant figures.
It’ll be interesting to see how this plays out, but the key is going to be the interest rate markets, as the correlation has been so strong. As traders continue to focus on the idea of higher interest rates, they prefer to hold paper instead of pay storage fees for gold, which is what we are seeing play out on the charts. Ultimately, the only thing you can count on right now is a lot of volatility.
