It is worth noting that although there is typically a negative correlation between the gold and the US dollar markets, both can go up at the same time.
- Gold markets have been showing signs of life recently, with a “buy the dip” attitude prevailing amongst traders.
- This has been reinforced by the latest CPI figures, which came in a little cooler than anticipated.
- As a result, the market is likely to see more buying interest, particularly as the $2000 level underneath has a lot of psychology attached to it.
Above this level, the $2100 area is likely to be a major resistance barrier. If the market can break above this level, it could signal a major rally in gold prices. In this scenario, the market could become a “buy-and-hold” type of market, particularly if there are concerns about the economy and people are looking to protect their wealth.
The technical setup for gold is also looking positive, with the 50-Day EMA racing towards the $2000 level. If the market can break through these two levels, it could be time to start thinking about shorting the market. However, this would require a very strong US dollar and rising interest rates, which is not currently the case. There is almost no real chance of this on a sustained basis at this point, so I remain confident that gold will continue to offer value. The market remains bullish.
It is worth noting that although there is typically a negative correlation between the gold and the US dollar markets, both can go up at the same time. This is often a sign that investors are running for cover and seeking safe havens for their investments. Therefore, it is important not to read too much into the correlation between the two markets, as it can break down from time to time.
At the end of the day, there is no interest in shorting the gold market anytime soon. Traders are likely to continue to buy the dip, particularly if the market gets close to the $2000 level. However, if the market can break above the $2100 level, it could signal a major rally in gold prices, and traders may want to consider taking a “buy-and-hold” approach. Ultimately, the key to success in the gold market is to pay close attention to the technical indicators and to be aware of any economic concerns that could impact the demand for gold as a safe haven asset.
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