Gold markets initially rallied on Friday but gave back gains as the World Health Organization held an emergency meeting due to the South African COVID variant. This has people concerned whether or not there could be a potential lockdown coming, and if there is likely that the economy could fall apart. This had people selling gains in market such as gold, but perhaps more importantly they were rushing into the bond markets. Because of this, gold appeared a lot less interesting, and therefore you can see that we ended up forming a massive, inverted hammer.
The market has been very noisy as of late, and the fact that we gave back the gains the way we did suggests that we are going to continue the extraordinarily negative move that we had kicked off earlier in the week. There is a trend line just below, so if we break down below the Thursday and Friday candlesticks, then I think it is likely that we will see a continuation down to the $1750 level. After that, then it is likely that we will go looking towards the $1700 level.
On the other hand, if we turn around and break above the top of the candlestick for the trading session on Friday, then it is possible that we could turn things around in a “rip your face off rally.” The market doing that would be a very strong sign, as it would show the market turning around completely after the mishap. Obviously, it would take a significant amount of momentum to make that happen, so I am not holding my breath, but it is a possibility that we need to keep in the back of your mind. Regardless of what happens, I think Monday is going to be a very messy affair, and you need to be cautious about putting too much money to work in the gold market or any other market for that matter. The candlestick is very ugly, so it is likely that we will break down based upon the fact that we had so much previous negativity as well. This market continues to be one that looks horrible, so be cautious about trying to get too cute with it, and make sure that the trade is working out in your favor before you add to it.
