Gold markets have plunged during the month of February, suggesting that perhaps the US dollar is trying to claw back in strength. I suspect we probably will see that be a main theme for the first half of the month but there is a high likelihood that sooner or later a new narrative will appear that has traders looking for assets beyond the agreement, hoping for more liquidity coming from the Federal Reserve.
Toward the end of the month of February, we are approaching the 50% Fibonacci level of the huge move that we had seen over the last 6 months or so. Ultimately, the market has been in a major trading range for some time, going back a few years. The $2000 level looks to be a major ceiling in the market and will more likely than not get broken anytime soon. That does not necessarily mean that the market is going to melt down, but I would not be surprised at all to see the $1750 level tested during the month. This will be especially true if interest rates in America continue to climb, and of course the US dollar starts the strength and as a result.
- If we do turn around, the $1868 level is an area that I’m paying close attention to, as we had quite a bit of noise on the daily chart that could come into the picture.
- Breaking above that level opens up the possibility of testing major resistance near the $1900 level.
- We informed several inverted hammers in a row at the $1900 level on the way down, showing that there is real selling pressure.
- Regardless, I do think this is a situation where you have a lot of noisy behavior, so therefore I think you probably have further to go to the downside before we see some type of attempted recovery.
The 61.8% Fibonacci level comes into the picture near the $1750 level, so I do think that it could be a potential area of interest. You will probably have most moves in the increments of 2 or 3 days at a time, you aren’t going to have huge moves one way or the other as long as the market participants continue to see so much noise in the bond market. The bond market is pushing everything else around at the moment.
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