The gold market continues to see a lot of noise, as we are looking at this market through the prism of testing massive support just below. At this point, the market has a big decision to make.
Gold
The gold market has collapsed during trading here on Thursday, despite the fact that interest rates are dropping. This is a break of the previous correlation between the gold market and interest rates in America. With this, the market is possibly catching some traders on Thursday. With this, there is probably a bit of position covering.
That is mainly due to the fact that there seems to be a bit of fear around the world when it comes to the Middle East again, as the Americans are pulling diplomats out of Saudi Arabia. Despite the fact that rates are falling, they are still very strong. That, of course, means that carrying a non-yielding asset such as gold continues to struggle when you can get higher rates in the bond market.
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The bonds dropping their yield could be a function of buying bonds today and a run away from more speculative assets.
Technical analysis
From a technical analysis standpoint, it's worth noting that the gold market is sitting between the $4,200 level on the top and the $4,000 level on the bottom. This $200 range has been important multiple times, as it was a demand zone back during this past summer. If we violate the $4,000 level, it could very well signify even further selling.
Longer term, I like gold. I like it a lot, truth be told. But as things stand right now, it's a market that seems to be struggling quite a bit, and we may get an opportunity to buy it at much lower levels. I'll be watching the $4,000 level very closely over the next day or two.