The gold markets reached towards the 200-day EMA again on Wednesday, as the US dollar took a hit after the FOMC Meeting Minutes were released. That being said, the market is likely to continue to see technical resistance just above at the 200-day EMA and the 50-day EMA. If we can break above the 50-day EMA, then it is likely that we could go looking towards the top of the gap which is closer to the $1860 level.
That gap will attract a lot of attention, and filling that Is something that I think we will probably do sooner or later. Pay close attention to the bond market, because if traders continue to jump into that market, they may push yields down enough to make gold attractive again. Whether or not that is longer term might be a different question, but if we can break above the top of the gap, then it is likely that we could go looking towards the $1910 level. Breaking above that could then open up the possibility of a move towards 2100, but that would take a significant amount of momentum and perhaps a complete breakdown in any momentum that the US dollar as.
To the downside, if the $1750 level gets broken, that opens up the possibility of a breakdown to reach down towards the $1680 level, an area where we have seen a significant double bottom. If we were to break down below that double bottom, then it opens up a move towards the $1500 level, which of course would attract a lot of attention. At this point, the market would enter a bit of a freefall, as it is a bit of an air pocket just waiting to be exploited.
The most likely of pathways would probably be to fill the gap, and then roll over again in order to continue the downtrend that we have seen recently. In general, this is a market that I think is going to continue to be very noisy and susceptible to sudden moves, but it does look like we are trying to figure out where we are going next. I expect a lot of chop, meaning that you should keep your position size relatively small.
