September is going to be a huge month for the gold market, because there will be an increase in volume as traders come back from holiday, and also, we are at a major inflection point in the marketplace.
All you have to do is take a look at the weekly chart attached to this article and recognize that the last 2 ½ years have seen a trading range, one that we are at the very bottom of. The question at this point is going to be whether or not this bottom holds, and the fact that we have the 200 week EMA approaching certainly does suggest that there is going to be a big fight. However, you should also keep in mind that the macroeconomic situation does not necessarily look rosy.
Look in the bond markets
The key to what happens with the gold market will be found in the bond market. I understand that retail traders hate that answer, but the reality is that everybody knows there is support just below. The question is more or less going to be whether or not willing to step in and buy gold in a situation where interest rates in the United States are almost certainly going to go higher. Ironically, that has people buying bonds at the same time, because they are trying to protect their trading capital. So as the bond markets are going to become more and more noisy, you will need to pay attention to how they are behaving.
- Higher rates typically mean lower gold.
- You will need to keep an eye on the 10 year note in the United States.
- There is a lot of interest just below, and especially near the $1700 level.
If the market were to close below $1680 on a daily close, I think at that point the bottom falls out. Alternately, if the market can break above $1800 during the month of September, that could open up another $200 for a move to the $2000 level. We are essentially being squeezed in the gold market, so I would use those 2 areas as an idea as to where the market may go for the next several months. If we do not get any resolution, then we are essentially stuck in an $80 range.
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