Gold Markets Rise As Yields Fall

All things been equal, I think we pullback and then find buyers at a slightly higher level than we did last time.

Gold markets rallied quite significantly during the trading session on Thursday as yields in America fell. That being said, they were due for a bit of a pullback so it does make sense that gold gets a bit of a boost. Whether or not this has legs is a completely different question, because we are in an area where we have seen quite a bit of noisy behavior previously. The 200 day EMA sits just above, so that of course will attract quite a bit of attention in and of itself.

If we were to break above the 200 day EMA, then I might be convinced that we could continue to rally, but I think we are more likely than not to see a lot of back and forth momentum, thereby trying to build a longer-term base. Building a base takes a while, so you should keep in the back of your mind that even if this does end up being very bullish for gold, it may take a while for it to really take off. After all, there has been a lot of selling as of late, and therefore there is quite a bit of work to do by those who would be bullish.

Underneath, the $1800 level looks to be offering support, and thereby gives the market a bit of a reference point. As long as we can stay above $1800, we still have the possibility of a “buy the dips mentality”, but that would be on short-term charts until the market proved itself. The 10 year yield continues to be something you need to watch quite closely, because it has an inverse correlation to this market. As yields go up, gold goes down and vice versa.

If we do clear the 200 day EMA, then it is likely that a lot of buyers will jump in and try to drive gold to the $2000 level over the longer term. It obviously would have a lot of work to do to get there, and in the environment that we find ourselves in currently, it would not be surprising at all to see nothing but chop being back and forth, which is the market’s way of punishing everyone at the same time. All things been equal, I think we pullback and then find buyers at a slightly higher level than we did last time.