This is a market that is a little stretched in the short term, so a little bit of a pullback would make a certain amount of sense regardless.
The $1800 level above is a significant resistant barrier, and it now has the 50-day EMA hanging about as well. That being said, the market is going to pay attention to the area quite intensely, as there is a lot of market memory in that vicinity due to the fact that it had been so supportive in the past. Because of this, I think it all lines up for a nice barrier that’s going to be difficult to break above. Whether or not we can break above $1800 is a completely different question, but at this point, I would suspect that it is going to be rather difficult to get beyond. If we do, it’s obviously an extraordinarily bullish sign.
On the other hand, if we turn around and break down below the $1750 level, it’s likely that the market could break down to the $1720 level, possibly even down to $1680 after that. That is an area where a lot of people will be paying attention because it was such massive support in the past. Breaking down below there then would open up a massive amount of selling pressure. On the other hand, a lot of this comes down to the US dollar as well, so pay close attention to that. We have seen a little bit of a giveback on the greenback, so it’s possible that we could see gold continue to move in a negative correlation. Ultimately, this is a market that is a little stretched in the short term, so a little bit of a pullback would make a certain amount of sense regardless.
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