Gold markets initially shot higher during the trading session on Thursday again, but now look as if the momentum is starting to run out. That being said, I do not necessarily think that it is time to start getting aggressive to the downside, just I recognize that momentum can only carry this market so far. Because of this, I would be cautious about trying to jump in right now. Quite frankly, I think you get a little bit of a pullback in order to find some value in this market. That could be something worth paying attention to over the next couple of days, because gold is obviously bullish, but momentum may have gotten a little ahead of itself. With this, I think that gold is more or less going to be a “buy on the dips” situation.
Looking at the gold chart today, I think it is obvious that there are plenty of support levels underneath that we could be paying close attention to. The 50 day EMA most certainly comes into the picture as it is curling higher, and we have seen the bottom of the last couple of candlesticks form here. As we shot higher from there, it makes a certain amount of sense that we would see a lot of support there. If we break down below that level, then I think things get kind of ugly.
Keep in mind that the gold markets are highly sensitive to the US dollar and of course interest rates, so it is important to pay close attention to what is going on in both the US Dollar Index and the 10 year note. If interest rates continue to spike like they had been doing, gold could very well get hit, just as the rising interest rates can cause a major problem for gold if they take off to quickly. All things been equal, this is a market that continues to see a lot of noisy behavior, but as things stand right now it looks like it is more or less going to be a “buy on the dips” type of situation. Until we can take out that big candlestick from Wednesday, it is difficult to say that you should be shorting this market, despite whatever may be going on in the other markets. Either way, gold looks pretty healthy and if we can take out the top of this candlestick, I think we go looking towards $1870.
