Gold markets initially fell on Friday but found buyers underneath to turn things back around and look very strong. In fact, we ended up turning around to form a massive hammer. We closed towards the top of the candlestick, and if we can break above the highs of the last three days, it is likely that we will continue to go much higher. At that point in time, the $1900 level would be targeted. That would be an extension of what we have seen for a while, but this market has been a bit overdone.
On the other hand, if we turn around and break down below the bottom of the candlestick, then we could go looking towards the $1840 level. If we can break down below there, then it is likely that we could go looking towards the $1800 level, where the 50-day EMA is starting to turn around and break above the 200-day EMA. If it does, that would technically be a “golden cross.” That would be a huge signal for buyers to go much higher.
This is a market that is a little bit overextended and now needs to kill a little bit of time. The US dollar has been rallying right along with gold, something that a lot of retail traders do not understand, but it can happen. In fact, most of the 1980s had seen both the US dollar rising right along with gold. Because of this, it is likely that the market will continue to be working on its own. After all, even though we have seen a lot of upward pressure, it is likely that we will continue to see buyers come in to pick up a bit of value. Gold has been trying to figure out whether or not it has enough momentum to finally enter an uptrend, and I think the last week has seen that finally happen. The market will continue to see a lot of noisy behavior, but at this point I suspect that we will continue to see plenty of momentum chasers jump into this market. This will be especially true if the US dollar starts to fall apart, but I think that is less likely than it was just a few days ago.
