Gold markets rallied again early on Tuesday, but it looks like we are trying to bust out of a potential double top pattern. This area that we are in at the moment has been very difficult to break through more than once, therefore I think you need to be very cautious at this point. A pullback is certainly possible, but I would not be a seller of gold, because quite frankly it is so strong. If we do break out above the 2020 level, then I think it’s probably a scenario where we could go to 2100 rather quickly as this would be a major break of resistance.
Underneath, the 2000 level is an area that I think a lot of people pay attention to due to the psychology of that round figure, but it’s also been sliced a couple of times so it’s very likely that even if we break down below there, you cannot read too much into that move. The 50-Day EMA is near the 1970 area and is rising. Ultimately, that could be the floor in the market at the moment, and it’s worth noting that the recent pullback was to the 38.2% Fibonacci level and the 200-Day EMA indicator. All things being equal, this is a situation where traders will continue to see upward momentum more than anything else. Typically, when a market only pulls back to the 38.2% Fibonacci level, you have a situation where the market has a massive amount of momentum.
All things being equal, this is a market that I think you continue to buy dips going forward, and therefore I don’t have any interest whatsoever in trying to sell this market. Underneath the market has so much in the way of support and noise, therefore I think this is a situation where the markets will continue to look for value, and then take advantage of it. However, if we do get the breakout, then it’s likely that the market will really start to take off. That would open up a “FOMO trade”, therefore I think it’s probably going to be a huge trade late in the year.
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.