Gold markets rallied initially during the session on Friday to try to break out of recent consolidation but saw a pullback as exhaustion came back into play. The gold markets have been a bit of “dead money” as of late, and it is likely that we will see more of the same considering that the US dollar got hammered during the day, and gold could not break out. That being said, if we get some type of continuation in the US dollar falling, then we could see gold rally as a result. The market is likely to continue to see a lot of volatility, but if we do break above the 200-day EMA, it is likely that the market could go looking towards the gap above.
The market breaking above the 200-day EMA could send this market towards the top of the gap which is closer to the $1860 level. At that point, I would anticipate that there should be a significant amount of resistance, but if we were to break above there it would be an extraordinarily bullish sign for the gold markets, as it would be a major resistance barrier broken through. Ultimately, I think we will more than likely see the market pick up momentum, perhaps reaching above the $1900 level. Breaking above the $1900 level allows the market to go much higher, and the momentum will start to pick up as we go looking towards the $2100 level.
To the downside, the $1750 level is a major support level, as it was previous resistance. If we do break down below the $1750 level, then we could go looking towards that double bottom near the $1680 level. Because of this, the market is going to continue to be very noisy in this area, but if we do get a sudden move in one direction or the other, we have very obvious levels from which to look for targeting. The market is going to be choppy regardless of what happens next, so you need to keep that in mind and keep your position size relatively light.
