Ultimately, I do favor the upside but I also recognize that we are just not quite ready to go higher.
Gold markets initially rallied on Tuesday but gave back gains rather rapidly in the middle of the session as yields in America continue to climb rapidly. Because of this, the gold markets continue to be very difficult to trade from anything more than a short-term perspective, as we have been in a range for a while. The gold markets are volatile most of the time, but recently we have settled into a relatively well-defined range between $1910 and $1950.
There is a mix of factors out there that are pushing the market around, not the least of which would be the interest rates on the 10-year note. They continue to spike higher, and that is negative for gold. At the same time though, we have the inflationary concerns around the world that are driving those higher, and that gives a little bit of support for gold where it would normally not find it.
Looking at the technical analysis, the range has been reliable over the last couple of weeks, but sooner or later we will make a bigger move. A long daily candlestick is probably needed to add enough confidence to make traders get involved, and it should be noted that we are seeing support from the 50-day EMA as well, which is something that will attract a lot of attention. The $1900 level sits underneath there, so I think we will see a huge barrier of support in that general vicinity.
That being said, you could make an argument for a bit of a descending triangle right now, but until we break down below that $1900 level on a daily close, I am not completely convinced. The market breaking down below there would open up the possibility of a move down to the 200-day EMA, which sits just below the $1850 level, but I do not think that is the most likely of moves, at least not without some type of massive strengthening of the US dollar.
On the upside, if we were to take out the $1950 level, then it is likely that we will go looking towards the $1970 level, and then even the $2000 level, an area that has a lot of psychology attached to it to say the least. Ultimately, I do favor the upside but I also recognize that we are just not quite ready to go higher.