Once a market gets overbought as this one is, it is only a matter of time before you get the opportunity to buy it “on the cheap.”
Gold markets gapped higher to kick off the trading week on Monday and then broke above the $2000 level. However, we have seen a little bit of selling pressure since then, making the market calm down just a bit. That being said, we are overbought, and I would anticipate a significant pullback rather quickly. It is more than likely going to end up being a market that you continue to buy dips in.
The $1920 level underneath should be rather supportive, as it was resistance in the past. Because of this, the market will pay close attention to that region, as it was the site of the most recent breakout. The shape of the candlestick is a bit of a shooting star, although that would be a bit of a stretch. Because of this, the market is likely to continue seeing rather volatile moves, but I think that if you are patient, you should be able to find a trade that ends up being quite profitable.
If we were to break down below the $1920 level, then the next support level is at the $1880 level which I would consider to be the “floor in the market.” The market breaking down below there would then have the hallmarks of a trend change, and I believe there would be a massive flush lower. However, that does not seem to be very likely at this point, so I continue to look at dips as setting up for buying opportunities given enough time.
The gold markets will continue to be driven higher based upon inflation and geopolitical concerns coming out of Ukraine. As long as there is shooting going on at the doorstep of Europe, it is difficult to imagine a scenario where gold changes its overall attitude. This does not necessarily mean that you should buy at any price, because I think once a market gets overbought as this one is, it is only a matter of time before you get the opportunity to buy it “on the cheap.”
It is obvious that the $2000 level has caused a bit of a barrier to progress, but quite frankly we got there too quickly anyway. I do think we will test that area again, but it may take a while to get there.