Gold markets fell significantly during the trading session again on Wednesday, as the US dollar continues to work against almost everything. The market is well below the 200-Day EMA, which of course is a large indicator that a lot of people will pay close attention to for trend direction. The market has broken out of a triangle as well, and it does suggest that we are getting ready to test the $1900 level. The $1900 level underneath is a large, round, psychologically significant figure, and therefore should attract a lot of attention. If we were to break down below there, then the market is likely to open up even more selling to go down toward the $1800 level. The $1800 level obviously would attract a lot of attention as well.
Short-term rallies at this point in time probably get sold into, with the 200-Day EMA offering a bit of resistance at this point. Furthermore, I think that the interest rate situation coming out of the Federal Reserve will continue to push gold lower, and bond traders are selling bonds off drastically, making rates rise even faster than the Fed wants. In other words, the market is likely to continue to see a lot of downward pressure, and I do think that every time we rally, you have to look at it with a certain amount of suspicion at this point. You can even make an argument for a large “M pattern”, which is also sometimes called a double top above.
While I do recognize that gold could bounce from time to time, I don’t necessarily think that we are going to see a complete change in trend any time soon, at least not until the bond market calms down. I do expect a bit of a fight at the $1900 level, which is an area where we have seen a bounce from previously, and of course there will be a certain number of options barriers in that area as options traders will have something to say. The last couple of days have been pretty brutal, and it looks like we are accelerating to the downside.
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.