Building Case for Higher Levels

Ultimately, this is a market that is building up enough momentum to make a bigger move, and now it is only a matter of watching the various levels to decide which way to follow. 

Gold markets rallied a bit on Friday to reach the $1950 level, an area that will be important to pay attention to not only because it is considered to be a “midcentury mark”, but it is also an area where we have seen resistance previously. If we can break above the $1950 level, then it is likely that this market will continue to rally from here.

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Looking at this chart, if we can break above the $1950 level, then we could go looking to the $1970 level. The $1970 level is an area of resistance as well, so once we clear all of that, I would anticipate that gold could very well find its way to the $2000 level. This is an area that will cause quite a bit of headline noise, and I think volatility. However, we have sliced through there previously, so I do not necessarily think that it will be difficult to make that happen again.

The 50-day EMA sits at the $1914 level and is rising. It has been a dynamic support level for quite some time, so I think at this point it is likely that we would see plenty of interest if we do drop towards that area. Underneath there, the market has support at the $1900 level, which is a large, round, psychologically significant figure, and an area where we have seen buyers previously. In fact, I believe that this support level extends down to the $1880, so if we break down below all of that, then gold would be in serious trouble.

While we did attempt to rally on Friday, I would also point out that we are in a potential descending triangle, and I believe that the next day or two will be crucial as to where we go next, so keep an eye on that. The US dollar has its effect on this market as well, so make sure to pay attention to the US Dollar Index. Ultimately, this is a market that is building up enough momentum to make a bigger move, and now it is only a matter of watching the various levels to decide which way to follow. If you are a short-term trader, then the range-bound trading in this market has been a blessing.