Threatening to Finally Break Out

Gold is not exactly the most liquid market all the time anyway, so messing around this time year can be really dangerous unless you take extreme caution. 

Gold markets went back and forth on Monday, as it looks like we are threatening the $1820 level. If we can break that level, then the gold market is very likely to continue going higher as it has been a somewhat reliable resistance barrier over the last couple of months. If we can clear $1820, then I anticipate that the market will go looking towards the $1850 level rather quickly, followed by the $1875 level.

On the other hand, if we turn around and break down below the $1775 level, that could negate the attempt to break out and send this market right back into the previous consolidated mess that we had been in. Gold is kind of finicky and messy to say the least, and it is finally starting to look okay, but gold has horribly underperformed other inflation related assets as of late, so you probably need to build up a position rather slowly. This way, you can just add once the breakout occurs and it continues to work in your favor.

Pay attention to the US Dollar Index, which has a massive negative correlation to the gold market, so you have to keep an eye on that as well, as the strengthening US dollar works against the value of gold rather handily. That being said, we are heading into the end of the year and the liquidity is going to be a major issue to say the least, so we may get a sudden spike, which is why you need to be cautious about that position size. Remember, gold is not exactly the most liquid market all the time anyway, so messing around this time year can be really dangerous unless you take extreme caution. I do believe that eventually we will probably break out to the upside, but the question is whether or not we need to pull back a couple of times, or if we can simply just shoot straight up in the air from here. It certainly looks like we are going to make an attempt to do so, but not until we get a daily close above that $1820 level would I be convinced of the breakout being imminent. We have done almost everything we have needed to in order to make that move, so now all we need is a little bit of follow-through.