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People have given up on gold and it’s likely that we will continue to see plenty of downward pressure on any attempt to recover.
Right now, the only thing that seems to be working is the US dollar, which is the opposite side of this trade. You short gold, you buy US dollars. In this scenario, I think that the $1800 level above is significant resistance, as it was previous support. The uptrend line also sits just above there, and then of course we have the 50-day EMA breaking below the 200-day EMA, forming the so-called “death cross.” All of this leads to a very bearish attitude in this market, so I hope we get a rally at this point because I am more than willing to start shorting it.
What Do the Candlesticks Show?
A couple of candlesticks that have made up the last 48 hours show just how negative this market has gotten, and these types of moves very rarely happen in a vacuum. This is not to say that we cannot rally, just that the rallies will eventually end up being selling opportunities at the first signs of trouble. In fact, I do not have a situation where I’m willing to buy this market, as we are so bearish. In order to make a shift in attitude, we would need to see at least a $100 turnaround, something that would take a lot of effort.
The market will continue to draw from here, perhaps reaching the $1700 level. After that, we could see gold really fall apart. I would anticipate a lot of volatility, but it’s obvious that people have given up on gold and it’s likely that we will continue to see plenty of downward pressure on any attempt to recover. As long as the US dollar continues to be strong, there’s no real hope for gold taking off.
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