Gold Markets Continue Showing Resistance

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In the short term, it looks like a pullback is more likely than not, so I would not be surprised to see traders take profits heading into the weekend.

  • The gold markets have gone back and forth during the session on Thursday, as we are sitting just below the $1800 level.
  • Keep in mind that the gold markets have hit a major area of resistance, and it would make a certain amount of sense that “market memory” comes into the picture.
  • If we break down the 50 Day EMA underneath, then it could open up further selling.
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Looking at the bond market, interest rates had dropped quite significantly, and that makes gold much more attractive as yields in the paper market do not offer as much of a return. That being said, I would be a bit hesitant to jump into this market right away, because there’s so much noise in the bond market. After all, the bond market drives everything, as it can give you an idea as to whether or not there is a lot of risk-taking out there, or if people are running for safety.

The one nice thing about the candlestick during the day on Wednesday is that breaking above it is a clear sign of strength, and a lot of people would probably jump into the market at that point. The $1800 level of course is a large, round, psychologically significant figure, and it would attract a lot of headline noise. However, it’s not really until we break above the $1815 level that we clear all of that. If that happens, I would anticipate the gold would go looking to the 200-Day EMA.

On the other hand, breaking down from here could open up and move down to the $1750 level, which is an area that previously had been resistant. In general, when you look at this market you can see that there has been a lot more volatility as of late, and it suggests that we are in fact going to continue to see noisy behavior, perhaps a pullback. We are still very much in a downtrend, and you should keep that in the back of your mind. If yields start to rise again, that will put a lot of downward pressure on gold, just as the opposite could send it higher. In the short term, it looks like a pullback is more likely than not, so I would not be surprised to see traders take profits heading into the weekend.

Gold chart

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