The gold markets collapsed on Tuesday, slicing through the $2000 level like it was not even there. This has been desperately needed as we raced towards the gap.
If you remember from my previous videos, I have suggested that there was a gap near the $1950 level that needs to be paid attention to, and still needs to be filled. That was the area that I thought we could see buyers return if we slice through the $2000 level, but quite frankly I did not expect to see that happen so quickly. This move happened in just a short hour or two basically, but nonetheless this is a market that had gotten far overstretched.
Keep in mind that the gold market had been on fire as of late, so selling off the way it has should not be a huge surprise considering that it is a small market. After all, if a huge player comes into the market and looks to take advantage of profits, that can kick off a lot of algorithmic trading, and cause a bit of a chain reaction. The Sam’s quite a bit in the futures market, and in the smaller ones like the precious metals market it tends to be a bit exaggerated.
After this absolute shellacking during the day, I think there will be a lot of traders out there looking their wounds, and this could set up for a nice buying opportunity, perhaps later in the week. I would not jump into it right away, and I think that the $1900 level will be crucial to pay attention to. If we can stay above that level, then it is only a matter of time before the buyers return and break back over the $2000 handle.
Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.