Markets Slam into the Top of the Channel

Right now, I just don’t want to chase the trade until we clear the next barrier. In the meantime, a lot of patience will be needed.

• Gold markets have rallied rather significantly during the Friday session after the job summer came out in the United States.
• The gold markets have reacted quite drastically to the idea of wage inflation in the United States dropping, and therefore it’s likely that we would see a lot of people looking for the Federal Reserve to slow things down as far as tightening is concerned.
• It’s very unlikely that the Federal Reserve is going to change its attitude, so I would not read too much into this.

The market is likely to see the gold market rally to show signs of strength again, but we are also getting a little bit overstretched. We are at the top of the channel that we have been in a while, and therefore I think we’ve got some work to do to break out to the upside, especially considering that the $1875 level has been important in the past. If we can break above that level, then I think it opens the possibility of a move to the $2000 level. The $2000 level is a large, round, psychologically significant figure, and an area that a lot of people will be paying close attention to.

Patience will be Needed

On the downside, the $1800 level is likely to be the “lower the market, assuming that we can even break down below the uptrend line. The 50-Day EMA has broken above the 200-Day EMA to form a bit of the old “golden cross”, which is a longer-term “buy-and-hold” signal that a lot of people pay attention to. Nonetheless, I think now pullbacks are coming, and therefore I think being a buying opportunity makes quite a bit of sense on the steps. This pullback should be thought of as value, and I do think that we get an opportunity to pick up cheap gold.

If we get a daily close above the $1875 level, then I would just go ahead and start buying there. I don’t presently own any gold, but I’m desperately looking for some type of value to take advantage of. Right now, I just don’t want to chase the trade until we clear the next barrier. In the meantime, a lot of patience will be needed.

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