- Gold markets have done very little during the trading session on Wednesday as we are sitting just below the crucial $1680 level. That’s an area that has been important more than once, as it had been massive support going back several years.
- Ultimately, this is a market that is highly sensitive to interest rates, and of course we have the Consumer Price Index coming out during the trading session on Thursday in the United States.
- This is obviously a major component of inflation, and the Federal Reserve will be paying close attention to it.
The entire world now is worried about what the Federal Reserve is going to do, as everything is moving based upon the idea of whether there is going to be cheap and easy money, or if the Federal Reserve will have to continue to tighten its policy. At this point, it’s also worth pointing out that the Producers Price Index came out as 0.4% month over month on Wednesday, instead of the expected 0.2%. In other words, inflation is not dropping, at least not in that part of the US economy.
Expect Volatility
When interest rates rise, it is very toxic for gold as it is cheaper to simply hold paper than it is to store metal. Furthermore, we have been in a downtrend for a while anyway, so there’s obviously a little bit of downward pressure to begin with. The 50-Day EMA sits right around the $1720 level, and it looks as if it is going to continue to offer dynamic resistance as we have seen multiple times. It’s also dropping, so it does make quite a bit of sense that we will continue to see plenty of selling pressure.
If we break down below the bottom of the candlestick for the Tuesday session, you kicked off an inverted hammer move, and it could open a drop back down to the lows again. Regardless, I would have no interest whatsoever in trying to get long of this market anytime soon, at least not until we break above the $1760 level. Ultimately, this is a market that I think will continue to see a lot of volatility and noisy behavior, but I think it is only a matter of time before that volatility has people selling yet again. At this point, I think we continue the grind.
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