Gold markets have rallied just a bit during the course of the trading session on Thursday to reach towards the $1780 level but have given back just a bit of the gains in order to show signs of exhaustion. There is a lot of resistance above, starting at the $1800 level and extending to the 200 day EMA. If we can break above there, then things change quite drastically, because we will probably go looking to fill the gap above, allowing gold to go looking towards the $1860 level.
On the other hand, to the downside we have the $1750 level offering support as we have bounced from there recently. That being the case, the market is likely to continue to see a lot of interest in this area, not only due to the fact that it had been recent support, but it has also been an area that was previously significant resistance. Because of this, we need to pay close attention to it because it could determine where we go next.
If we continue to hold above this level, then it is likely that we will see gold try to recover. That probably would coincide with the US dollar falling a bit, which of course does tend to have a bit of a negative correlation to the gold market. However, if we were to break down below the $1750 level, we could see the market goes looking towards the double bottom underneath that the $1680 level. That is an area for me that if we get broke below it, then the market goes looking towards the $1500 level.
The one thing I think you can count on is a lot of choppy behavior and of course the jobs number coming out on Friday will have a massive amount of influence on what happens next not only with the US dollar but then again by extension the gold markets as well. Pay attention to bonds also, because of money starts flowing into bonds, that could take some of the luster away from gold itself. I believe that it is more likely than not we go sideways during the session, because the Independence Day holiday is on Saturday, and it is likely that we will see traders walk away from their terminals rather early during the session.
