- Gold markets have shot higher during the trading session and what would have been a very thin holiday environment.
- After all, liquidity is starting to disappear as people are focusing on the holidays and not necessarily the markets.
- Because of this, you should be very cautious about any position sizing that you have right now, but it certainly looks as if gold is trying to make a statement.
If we can break above the highs of the day then I think we continue to grind our way toward the $1875 level, an area that has been resistant more than once. There’s a certain amount of “market memory” there, so I would obviously be paying attention to it. On the other side of the canister for the day, if we were to break down below the $1800 level, we could see a move down to the 200-Day EMA. That currently sits at the $1755 level, and it also has the 50-Day EMA quickly approaching it. This is a situation where you could get close to forming the “golden cross”, which obviously would be a longer-term bullish sign.
Starting to Break the Negative Correlation
At this point, I think those moving averages will offer a bit of a support barrier, and as result, I think that if we were to get below there, then we could drive down to the $1700 level. I do think at this point we are more likely than not going to see a little bit of a pullback as we continue to channel higher, but that should end up being a nice buying opportunity. After all, in this environment, there are not a lot of volumes so you can only read so much into these erratic moves. We do drive and be looking to pick up little bits and pieces of gold, but I’m not necessarily going to get aggressive about it. When we can break above the $1875 level, then we could really start to take off and go looking to the $2000 level. It may take some work to get there, but I think that might be the longer-term trajectory.
Furthermore, don’t get sucked into the idea that the US dollar has the fall right along with gold rising because we are starting to break that negative correlation, which does happen from time to time, despite what some people will tell you.
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