The gold market rallied a bit during the trading session on Monday to reach towards the $1785 level. That being said, the $1750 level underneath should be supportive, as it was previous resistance. Just above, we have the 200-day EMA that could offer a bit of resistance, as it is a highly followed technical indicator. If we were to break above there, it is likely that we could go looking towards the top of the gap, which is close to the $1860 level.
To the downside, if we were to break down below the $1750 level, it is likely that the market could go looking towards the double bottom just below the $1700 level. The double bottom is where we have taken out to the upside, so now it almost looks as if we have to retest it in order to find out how this plays out. If we break down below there, then it is very likely that we could go much lower, perhaps reaching down towards the $1600 level, maybe even the $1500 level.
If we somehow broke above the gap, then it is possible that we could go looking towards the highs again, maybe even breaking above there. Breaking above that level then allows the market to go looking towards the $2100 level, which was the recent highs over the last couple of years. That seems very unlikely now that we have seen a big gap lower, and the fact that the bond markets are getting a bid suggests that the majority of traders are jumping towards the bond market instead of gold.
I think this is a market that still has a lot of headwinds, so it is difficult to get overly excited one way or the other, and I think that gold is probably going to be the laggard when it comes to the metals market, as the silver market also has the benefit of the industrial demand coming back into play. The one good look here though is the fact that we are closing towards the top of the candlestick for the trading session, so that suggests that there might be a little bit of follow-through. The 200-day EMA could be the target, but I believe that if you do decide to get long of this market, you should probably build up a position rather slowly.
