Gold markets initially tried to rally during the course of the week, but then plunged below the $2000 level. By doing that, the market looks as if we could drop all the way down to the $1950 level rather quickly. However, I think there are plenty of buyers in that general vicinity, and then again down near the $1900 level. All things being equal, I think this would be healthy, because we have tried so hard to go to the upside, but obviously in the past you have seen a lot of resistance between the $2000 level in the $2100 level.
Ultimately, I think that the 50-Week EMA rising above the $1850 level and heading toward the $1900 level suggests that we do in fact have buyers underneath. All things being equal, this is a market that’s either going to have to pull back in order to attract more buyers, or perhaps grind sideways in order to work off some of the profit we have seen for a while. That being the case, I think we’ve got a situation where it’s still a “buy on the dip” type situation, and I certainly would not be a seller as gold is being used as wealth preservation at the moment, which of course is something that’s in high demand.
If we were to somehow take off to the upside and move past the $2100 level, gold could really start to take off at that point, and it could be more of a “buy-and-hold” type of situation. Ultimately, I favor the upside, but I also favor finding quite a bit of value on dips in order to get long.
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.