I think this is a market that will continue to see significant choppiness, so we need to be cautious with our position size.
The gold markets fell initially on Friday only to turn around and show signs of life. That being said, the market is going to continue to be noisy overall, as the gold market is being thrown around by the bond markets and interest rates coming out of the United States.
Looking at this chart, the $1800 level is crucial, and an area where the market has been imported multiple times. If you were to break down below there, then I think the gold market has much further to go, perhaps opening up the possibility of a move to the $1750 level. You will notice that I have marked on the chart where we had a bit of a double bottom form in that area, so I think it’s important to pay close attention to it.
If we were to break above the top of the candlestick from Friday, that could open up a move toward the highest from Wednesday and Thursday which is just shy of the $1850 level. That is an area of importance that sellers will pay close attention to, but if we were to break above there, then we could go to the $1800 level. The $1880 level it’s an area that has been at the top of the larger consolidation area.
If we did break above there, then it’s likely that we could go to the $1920 level, possibly even the $2000 level after that. That obviously would go along with the idea of lowering rates, or perhaps even extreme inflation. Ultimately, I think this is a market that will continue to see significant choppiness, so we need to be cautious with our position size, but once we finally do get some type of impulsive candlestick that breaks out of the range, then we are more likely than not set up for a fairly big move. At that point, I would become much more aggressive with my position sizing, but until then the fact is that you will probably be stuck trading short-term charts, and with relatively small position sizing until we can get some type of clarity. I suspect that as traders continue to guess as to what the Federal Reserve is going to do, they will continue to guess what gold markets are going to do.