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I think we are going to continue to struggle with volatility.
The gold markets fell on Monday to reach the 200-day EMA yet again. The 200-day EMA is an indicator that has offered dynamic support for the last several days in a row, and attracts a lot of attention from longer-term traders. The gold markets have been falling for a while but have tested the indicator multiple times.
So far, the 200-day EMA has been held, and it does suggest that there is a certain amount of interest in this area. Furthermore, it is at an area that had been resistant previously, and the form of $1850. As long as we can stay above the $1850 level, then it is likely that there is at least an opportunity to consolidate, maybe even recover if we get lucky. However, we are essentially bouncing around between the 50-day EMA and the 200-day EMA indicators, which typically means we are about to build up a lot of inertia, and then kick off a bigger move in one direction or the other.
Gold has been struggling due to a strengthening US dollar, something that had been one of the mainstays of the Monday session. We saw the greenback strengthen quite drastically, and this had a negative influence on the gold market. That being said, if the market was to break down below the $1850 level, then it is likely that the market would go looking to reach the $1800 level. The $1800 level is an area where we had launched previously, so it would make sense that buyers would show up to try to defend the market at that point. “Market memory” would dictate that we should see action in that area.
When you look at this chart, you can see clearly that we have been selling off quite significantly over the last several weeks, and I think we are going to continue to struggle with volatility. Pay close attention to the interest rates coming out of the United States, because if the yield on the 10-year note continues to skyrocket, that will work. After all, bonds are starting to offer a bit of a “real yield” at the moment. It is not until we break above the 50-day EMA that I would be a buyer of gold, something that does not look likely in the short term.
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