Gold continues to be very noisy, but it is obvious that the market is at least trying to defend the overall uptrend as things stand.
Gold markets initially fell on Thursday to break down below the crucial $1880 level. However, by the middle of the session, it appears that there has been a complete change of heart, as traders have stepped in and started buying again. The hammer that is forming for the day is right at the bottom of the support, and quite frankly where you need to see it if you are even remotely bullish on gold.
While it is obvious that the US dollar is strengthening against almost everything, gold has been moving higher with the dollar for the most part, at least until the last couple of days. At this juncture, we could see a potential move much higher, but we need to get past the $1905 level. If we clear that area, it would be a significant sign of strength and could cause a complete turnaround in this market. It is probably worth noting that we tested the 200 Day EMA, or at least came close to it during the trading session.
With a lot of inflation out there, it does make quite a bit of sense that people will be looking to buy gold to protect their wealth. That being said, bond yields in America have been a major detriment to the gold market, so we will have to pay close attention to that. The ability to gain “real yields” in the bond market makes the paper much more attractive than metal.
If we were to break down below the 200 Day EMA, I suspect at that point gold would more than likely go looking to reach the $1800 level. I do not expect that move, and quite frankly we are oversold regardless. A simple bounce to the 50-Day EMA could be expected, but that does not mean that it is going to be easily accomplished. If we break above the 50-Day EMA, then gold more than likely will go looking to reach the $1970 level above. Because of that, then I think you could start to see a case made for longer-term bullish pressure. Gold continues to be very noisy, and therefore you have to be cautious, but I think it is obvious that the market is at least trying to defend the overall uptrend as things stand.