The gold market has rallied slightly on Friday, as traders are trying to determine whether or not interest rate markets will calm down.
Gold
The gold market has rallied a bit during the early hours on Friday as we continue to see a lot of moves in the markets based on the idea that interest rates are throwing things around. After all, interest rates in America rising are typically bad for gold, but we've seen such a sell-off in the gold market has been because of the higher rates as of late.
When you look at what's going on now, the question then becomes whether or not we are trying to form some type of consolidation area. I think you could make that argument, but we'll just have to wait and see. We are sitting just above the crucial 200-day EMA so that obviously it is an area that a lot of people will watch.
Inflation and Interest Rates
If we can recapture the $4,600 level and for me that's a big if then I think the markets can start to recover a bit more, but we probably need lower rates at least in the United States if not worldwide. Most of the interest rate climbing has been due to the idea that the Federal Reserve may have to stay tight for longer as energy inflation could be an issue with so much being blocked in the Strait of Hormuz.
Gold is clearly trying to figure out what it wants to be. Does it want to be a safety asset, or does it want to be an alternative to the dollar? Right now, it looks like the alternative to the dollar story's winning as the dollar has risen due to the higher interest rates in America.
Unfortunately for gold, that's been a negative thing. Now we'll have to wait and see, but I think in the short term we're in a basing pattern, so you need to be very cautious paying attention to $4,600 above and the 200-day EMA below.