- Gold markets have done very little during the trading session on Wednesday, as we are sitting just above the $1700 level.
- This is a market that has the potential of trying to form a bit of a “double bottom” in this area, but that support extends all the way down to the $1680 level. It’s not until we break down below that level that we could see a significant breakdown.
- Ultimately, I think this is a market that will continue to be noisy, to say the least.
If we do rally from here, the market is going to continue to show signs of confusion, because there is a lot of resistance just above. The $1725 level is an area that I think will cause quite a bit of resistance, but after that, the market likely goes the looking to the 50-Day EMA near the $1750 level. That could be an area where we see a lot of resistance in selling pressure, so signs of exhaustion could be an opportunity to start shorting again.
Volatility Ahead
If the market was to break above all of that, then it could go all the way to the $1800 level, which is where the 200-Day EMA sets. Keep in mind that the gold markets are highly sensitive to the US dollar and interest rates in general so you will have to pay attention to both of those markets. Furthermore, this is a market that I think will continue to be highly volatile, so you need to be cautious with your position size, and therefore you will probably want to trade somewhat small with your position sizing. The downtrend has been very strong for a while, but it’s also worth noting that the $1680 level is an area that has been massive support multiple times over the long term, so if we were to break down below that level it’s likely that there will be a flush lower.
If we did somehow turn around and break above the $1800 level, then it’s likely that the market could be turning around at that point, perhaps reaching the $2000 level as it will have completed a “W pattern.” Ultimately, that would take a lot of momentum, and I don’t see that happening in the short term but it’s something that we need to keep in the back of our heads.
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