The Gold markets gapped higher during the open on Monday and then continue to rally in order to break the $1530 level. At this point, the market looks very likely to continue going higher, and therefore short-term pullbacks will probably continue to offer value. We have recently bounced from the $1500 level, which is the bottom of the overall consolidation area marked by the gray rectangle on the chart.
Beyond that, the $1500 level is the beginning of a “zone of support” that extends down to the $1490 level. Below there, we also have the 50 day EMA that of course attracts a lot of attention. With that, it seems that the Gold markets are heavily supported underneath and should continue to attract a lot of order flow. This makes a lot of sense as central banks around the world continue to cut interest rates and buy bonds. This of course is the equivalent of quantitative easing and drives up the value of gold in several currencies, not just the US dollar.
Add to all of that the fact that the geopolitical situation is a complete mess, then you have a perfect scenario for gold to continue to rally. Gold has been a bit of a laggard in comparison to silver which was up much more during the trading session. Gold and silver do tend to move in the same direction, as the fundamental reasons underneath are very similar for both markets to rise.
Pullbacks at this point continue to offer plenty of buying opportunities, as short-term traders will come in and pick up value. To the upside, I see the $1560 level as the next resistance barrier, but we could go to the $1600 level again. Beyond that, the market probably goes looking towards the $1800 level and then eventually the $2000 level longer-term. At this point, the market will be bullish yet choppy and therefore you may have trouble hanging onto a longer-term position, unless of course you can build up the value of it over time. Otherwise, it’s a short-term traders type of environment on dips, and of course it is all but impossible to short this market with any type of conviction as gold has been so bullish over the last several months. The candle stick is very impressive looking for the session, and should continue to be an influence on where we go next.
