- Gold markets have rallied just a bit during the trading session on Thursday as we continue to hang on to a major support level.
- At this point, we look as if we are trying to figure out whether or not this is a “double bottom”, but I think it will be short-lived to say the least.
- After all, if we were to break down below this general vicinity, then it likely the gold will continue to go much lower. I think it’s only a matter of time before we see a breakdown.
- However, does not necessarily mean that we will get a short-term bounce.
Gold has a huge negative correlation to the US Dollar, and of course interest rates in the United States. As long as the interest rates in the United States continue to be elevated, it’s difficult for gold to get a real footing to the upside. Gold has done significantly better against other currencies, but against the dollar specifically, it has been hammered.
Market Likely to Drift Lower
If we do rally from here, then the $1700 level would be a very interesting area, right along with the $1680 level. The 50-Day EMA sits right around the $1700 level and is dropping. That is an area where I think you see a lot of dynamic resistance. Furthermore, you also have a downtrend line that is being tested, and therefore it’s likely that we will continue to see sellers given enough time. Quite frankly, if gold rallies are here, I will not be a buyer of it, I will be looking for an opportunity to sell it.
If we do break down below the potential “double bottom”, then it’s likely that we go testing the $1600 level, followed by the $1500 level. The $1500 level is an area that has a lot of psychology attached to it, so therefore I would expect a bit of a fight in that region as well. Either way, this is a market that I think has plenty of negativity, and I think it’s probably only a matter of time before we see an attempt to really throw things into a massive move lower. It is not until the Federal Reserve has a reason to start changing its attitude that I think the market is ready to turn around to go to the upside.
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