Gold Forecast: Continues to Soften on Tuesday

• Even though it was a green candlestick for the day, the reality is that the gold market did not recover from the Sell from the previous day.
• Quite frankly, this is a little bit of a whimper after a major selloff, and I do think that there’s probably going to be a little bit of follow-through.
• While we did bounce from the 200-Day EMA, the reality is that the rally only lasted a very short time.

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Interest rates have risen in the United States over the last couple of days, so it does make a certain amount of sense that we have seen softness. The question now is whether the $1800 level in the spot market is going to continue to be an area of interest. Because of this, think we got a situation where we probably continue to see a little bit of a pullback, but that pullback should sooner or later offer a little bit of support that we can get involved in. However, you should keep in mind that both gold and US dollar can rally at the same time, especially in a recessionary environment.

Volatility Ahead

Looking at the candlestick, you can make an argument for a little bit of an inverted hammer, so if we were to turn around and break above the top of it rather quickly, that would be a very bullish sign. At that point, I think we’ve got a situation where we go looking to the $1800 level again. However, if we break down below the bottom of the candlestick and perhaps even the 200-Day EMA, it’s likely that we go looking to the $1730 level. Because of this, I think you get a lot of volatility ahead, but that’s nothing new for the gold market.

A breakout above the high on Monday kicks off a major turnaround and therefore could open a huge move higher. At that point, the measured move from the bottoming pattern could open the possibility of a move to the $2000 level, but it’s unlikely to be an easy path higher. With, interest rates are worth paying attention to, but if gold moves right along with interest rates to higher levels, you must understand that is a real possibility if the market is trying to price and recessionary conditions.

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