Gold Price Outlook – Gold Continues to Drop on Tuesday

Gold Technical Analysis

The gold market has broken down below the $4,000 level, which, of course, is a large, round, psychologically significant figure that we will be paying close attention to. We are getting somewhat close to the 50 % Fibonacci retracement level at the $3,880 level, where the 50-day EMA is racing toward. Ultimately, this is a market that I think is likely to see a little bit of interest in this area, but this is an ugly candlestick in so much as it is a break of that psychologically important number.

If we can recapture the $4,000 level, that would be bullish. But as I’ve been saying for a while, I’m not entirely convinced that the gold rush isn’t over. You can see that volume has picked up quite nicely while price is dropping. I think you have a situation where the market just got out of control. And for that matter, we are down by more than 10 % from the highs. All things being equal, this is a market that I do believe is more of a “fade the rally” type of bounce with signs of exhaustion. The market broke below the 50-day EMA to reach the 61.8 % Fibonacci retracement level near the $3,757 level, and anything underneath there opens up a massive drop to the 200-day EMA.

Ultimately, this is a market that I think we are on the precipice of wiping a lot of people out. And quite frankly, it’s what you deserve, chasing it all the way after this type of move. The real kicker here was when you started to see people waiting in line to buy physical metal in places like Singapore and Australia; it was a clear sign that the “dumb money” was rushing in. And now we’ve seen this play out.

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