Gold Technical Analysis
The gold market has broken down significantly during the early part of the trading session here on Monday as interest rates continue to climb in the United States, and the idea of energy shocks is still at the forefront of traders’ minds.
With that being said, I think we have to look at this as a market that is likely to continue to move with the bond market. Unfortunately, the bond market continues to sell off based on the idea that inflation is going to be rather brutal in the United States and other places. The Federal Reserve is likely to remain very hawkish, and that does, in fact, work against the value of gold. This is a common reaction in the market and certainly hasn’t been avoided lately. The higher rates, lower gold prices continue.
If we do break down below the trend line, it does open up the possibility of a move down to the $4,000 level, but we’ll just have to wait and see how that plays out. The $4,000 level, of course, is a large, round, psychologically significant figure. Anything below there would be pretty ugly.
The $4,000 Level Is Extraordinarily Important
As I look at the gold chart, it does look like we are trying to roll over. The $4,000 level is extraordinarily important, but I do believe that longer term, gold will end up being bullish. We need to get this mess in the Middle East sorted out first. Then we can start to focus on all the profligate spending by governments around the world.
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