Gold markets initially pulled back just a bit during the trading session on Wednesday but have seen buyers jump back in as yields in the United States started to fall. This was due to a superb treasury auction in both the 10 and 30 year markets. This was something that people are concerned about, but it does look like appetites have returned for paper, and that of course is something that be paying close attention to as yields had spiked recently. As yields dropped, that makes the idea of owning gold more palatable, having people come in and pick it up yet again from this technically important region.
When you look at the chart, the $1700 level of course would show significant promise for some type of support, and the fact that we ended up forming a massive engulfing candlestick on Tuesday suggests that perhaps we are trying to bottom. Furthermore, the continuation during the day on Wednesday was a good sign, especially when you look at the fact that the yields were dropping in America, right along with the 61.8% Fibonacci retracement level offering support as well. In other words, if we are going to save the overall uptrend from the longer-term standpoint, gold needs to do it right where we are seeing it try to do so. The $1750 level being overtaken would be a very bullish sign, and I bring in more money to the market. Furthermore, the yields drop in America will also have people looking towards assets all over the place in order to try to earn some type of real return when it comes to real rates.
If we were to break down below the lows of both Tuesday and Wednesday, then the market could break down towards the $1500 level. That is an area that has a significant amount of psychological importance attached to it, so having said that it is likely that we would see a certain amount of buying pressure in that area as well. Nonetheless, it looks as if we are ready to make some type of bigger move, so if gold markets get a little bit of help from the treasury markets, we could see a rather significant move to the upside. This of course is just as likely to be negative if we turn around, based upon a spike in the yields again.
