Consolidating Between Two Moving Averages

In general, I believe that the next couple of days could be very noisy, but eventually we will get clarity.

The gold markets initially fell on Friday but then turned around to show signs of life. The jobs number has obviously moved the markets back and forth, but at the end of the day we did not change much. The 200-day EMA underneath is sitting just above the $1850 level. Just above, we have the 50-day EMA near the $1913 level and curling lower. The $1900 level seems to be a bit of a magnet at this point in time.

Advertisement

The market dancing around between these two moving averages does make a certain amount of inertia appear, and it is only a matter of time before we have an even bigger move. Once we break out of this area, it is likely that we would see a substantial move. If we were to break down below the 200-day EMA on a daily close, then it is very possible that we could go down to the $1800 level. The $1800 level is an area that has seen a lot of support, so I would anticipate that there would be a certain amount of buying in that area if we do break down.

On the upside, if we were to break above the 50-day EMA, then it is likely that the market would go reaching to the $1970 level, possibly even the $2000 level. Obviously, there is a lot of noise between here and there so I do not think it would necessarily be a straight shot. Because of this, the market is likely to zigzag all the way higher, but anything is possible at this point.

Pay close attention to the interest rates in the United States, specifically the yield on the 10-year bond. As it continues to rise, it does work against the value of gold at times, as does a strengthening US dollar. (Quite often these two are the same thing.) Nonetheless, this is a market that I think will continue to see a lot of volatility, but once we break out of this range, it will probably become quite a bit more aggressive in either buying or selling the gold market. In general, I believe that the next couple of days could be very noisy, but eventually we will get clarity.