Gold markets initially tried to break above the $1700 level during the trading session on Monday but gave back all of those gains to collapse $150 during the week. This is been a rough week to say the least, forming and engulfing bearish candlestick.
Gold markets initially tried to rally during the week, reaching towards the $1700 level before falling to form a massive outside candle. At this point, the $1550 level underneath is the bottom of the range, and it looks as if the market is going to break through there and try to reach towards the $1500 level, possibly even the $1450 level. At this point, the market has shown a lot of volatility and it’s starting to look more and more like the gold market has peaked.
At this point, it will come down to whether or not the gold market is being looked at as a safety trade, or if it’s a hedge against inflation. Quite frankly, I think a lot of the selling has to do with forced liquidation due to funds out there trying to cover massive losses in the stock market and the like. Quite often, traders will close out winning positions to keep from being margin called in other positions. This is exactly what’s been going on for several days, and the destruction in the market has been quite impressive. With that being the case, it’s likely that we probably have more downward momentum going forward. Although it would not surprise me at all to see some type of bounce from here, I anticipate that somewhere around $1625 we will probably see sellers jump back in based upon the weekly candlestick that we have just formed. Either way, it’s going to be extraordinarily volatile.
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.