Going forward, buying dips is likely to be the best approach to trading this market.
- The gold markets rallied during Wednesday’s trading session, reaching towards the 50-Day EMA.
- It’s worth noting that the market is trading between the 50-Day EMA and the 200-Day EMA indicators, attracting traders from both sides of the trade and leading to choppy behavior.
- It’s expected that we may face some trouble in this region but breaking above the 50-Day exponential moving average on a daily close could propel gold much higher.
This is likely, as traders seek to protect their wealth in the current environment. After all, do not underestimate the damage that was done to portfolios last year, and of course the havoc that all of the volatility that we have seen could have on the psychology of the overall market.
The 200-Day EMA has offered significant support, and systematic traders have joined in, pushing the market higher. As traders worry about currency depreciation worldwide, gold makes sense as a safe haven asset. The market is expected to try and reach towards the highs but breaking past the crucial $1900 level has been difficult for buyers in the past. If we do break above that level, a move towards the $2000 level is likely. Additionally, the 200-Day EMA sitting above the 50% Fibonacci level makes sense. Because of this, I think the market is going to do everything you can to test those previous inverted hammers, and perhaps try to break above there.
Going forward, buying dips is likely to be the best approach to trading this market. However, keep in mind that volatility remains extreme in most markets, and multiple opportunities are expected to arise. You will more likely than not will have to look to short-term Forex charts to place your trade, because the longer term traders are going to have to deal with a significant amount of volatility. The only way that a longer-term trader gets through this with their sanity is probably with a very small position, or completely unlevered due to all of the noise that I see in this market. Ultimately, gold is probably a nice long term holding, but in the short term it’s going to be messy, so you need to be prepared for that. I don’t have any interest in shorting this market anytime soon as gold has proven its resiliency at a major level in the last few days.
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