Gold markets rallied a bit during the Monday session as the US dollar lost some ground. The gold market now has to ask questions as to whether or not it just formed a double bottom, or if this is just simply going to be thought of as a bounce along the way. I think at this point, it’s important to pay close attention to the next couple of days, as it could give us a “heads up” as to where we are going over the next several weeks.
Pay Attention Over the Next Few Days
There is a huge negative correlation between the US dollar right now and interest rates. As long as the US dollar and interest rates were to fall, that should be good for gold. During the session on Monday, this was all about the US dollar dropping in value, as Russia lost some ground in Ukraine. The longer-term macroeconomic picture has not changed in the slightest, so we are likely to see some type of pullback eventually.
If we break above the 50-Day EMA, then it opens the possibility of a move to the $1800 level. Breaking above the $1800 level not only breaks the most recent swing high but also breaks above the 200-Day EMA, both of which could be thought of as victories. In that scenario, gold could really start to take off. It’ll be interesting to see if that can happen, but the reality is that the $1680 level will continue to be very difficult.
Choppy Gold Markets
Expect a lot of noisy behavior, but that is more likely than not going to be the norm for the foreseeable future. What’s interesting is that the Average True Range has been dropping for some time, showing you just how choppy the gold markets are.
- There are a lot of potential concerns out there when it comes to the geopolitical and macroeconomic picture, so I would not get overly excited about buying this market quite yet.
- The US dollar has been a favored asset for quite some time, and trends don’t typically turn around on a dime.
- This bounce will more likely than not end up being a nice selling opportunity for those who are patient enough to take advantage of it. In the meantime, I’ll be on the sidelines.
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