As things cool off in the Middle East you could see gold resumes its grind higher, but I think it’s probably going to be more of a grind and not a jolt, than anything else.
Gold
The gold market has rallied a bit during the trading session on Tuesday as we continue to dance around the 50-day EMA, but more importantly continue to trade back and forth around the 4.30% level in the US 10-year yield. If that yield continues to drop like it has over the last week or so, we could see continued movement in the gold market to the upside.
This has been a very difficult couple of weeks for traders who are not very experienced, mainly because they are told that gold is a safety asset, and they think of it in those terms. While that is not necessarily untrue, the reality is rising rates are much more attractive to institutions than a non-yielding asset such as gold.
Gold Resuming its Grind Higher
As things cool off in the Middle East you could see gold resume its grind higher, but I think it’s probably going to be more of a grind than anything else. The $4,600 level looks to be supported and I think as long as we can stay above there you have to feel somewhat bullish about this market, but I also recognize that gold is probably going to be more of a slow typical rally like we used to have instead of the parabolic moves that we had seen just a few months ago.
If we do break down below the $4,600 level, we more likely than not test the 200-day EMA and I’d venture to guess that we probably would see accompanying interest rates in the United States and other places rising. That could be poor for gold, but the reason obviously at this point is probably more likely than not going to come in the form of headlines coming out of the Middle East.