In general, I think you continue to see a lot of volatility at this point but judging from what I’ve seen over the last couple of days, I think it’s probably easier to break down than it is to take off.
- Gold markets and try to rally during the trading session on Thursday but struggled again as we continue to see a lot of resistance above the $1880 level.
- Quite frankly, the market suddenly looks very sick and this is a surprising turn of events. While I would have anticipated a little bit of downward pressure, the reality is that the fact that we can even pick ourselves up off the mat tells me that there’s a lot more to this.
- Perhaps the US dollar is about to start ripping higher, which of course would be negative for gold if it happens too quickly.
Breaking about the time the candlestick would be very bullish, perhaps opening a move all the way to the $1950 level. The $1950 level is an area that has caused significant resistance in the past, and therefore it’s likely that we see this market respect that area if we did get up there. If we were to break above the $1950 level, then it could open the possibility of a move to the $2000 level.
Volatility Ahead
The $2000 level of course is an area that would attract a lot of attention, and as a result, I think those headlines would probably cause a lot of profit-takings. It would be very difficult to get there, and we would probably need to see the US dollar get crushed. In that scenario, I think you’ve got a situation where the entire marketplace would be upended.
On the other hand, if we break down below the 50-Day EMA, I don’t see much keeping this market from going down to the $1800 level. The $1800 level is where the 200-Day EMA sits and is an area that would attract a lot of attention. The area below there would be like a huge air pocket, sending this market down to the $1650 level. In general, I think you continue to see a lot of volatility at this point but judging from what I’ve seen over the last couple of days, I think it’s probably easier to break down than it is to take off. The market participants will continue to see a lot of volatility, so therefore caution is probably advised. Position sizing will be everything, but once the levee breaks, this market is going to move quickly.
