Gold markets rallied a bit on Wednesday as we continue to see the markets reach towards the massive downtrend line as well as the 200-day EMA. The market is going to see a lot of resistance just above this overall area, extending all the way to the $1805 level, so as long as we stay below there, I have no interest whatsoever in trying to get long. As long as we stay below that massive barrier, I do not have any interest in trying to get too cute, because with the interest rates in the United States continuing to rise, it works against the value of gold in general, so I think you need to pay close attention to the 10-year note.
The candlestick is rather bullish, but we have seen this happen before, where the gold market rallies only to give up the gains. I think this is likely to be a market that you still have to focus on in the short term, because even though we have had a nice move to the upside during the day, the reality is that on the short-term chart you see a significant amount of choppy volatility and indecision. There was a massive selloff as soon as Wall Street came on board, but it seems to have abated. This does not necessarily mean that you can base anything on that small segment in time. When you look at the overall attitude of the market though, it is obvious that it is starting to struggle to make it known as to which direction we are going, so I am waiting to see some type of breakout or break down to get involved.
A breakdown below the $1750 level would have this market breaking down quite significantly, just as a move to the $1805 level that shows continuation would be a very bullish sign. Between those two levels, I think we just have more sideways chop than anything else. The gold markets continue to be very erratic, so you need to be very cautious about your position size, and only add once the trade starts to work out in your favor. The market does tend to move very quickly once it makes up its mind, so keep that in the back of your head as well.
