Pay attention to interest rates and their rate of change; that is going to be the game.
Gold markets went back and forth on Friday as the jobs number in the United States surprised to the upside. The jobs number was anticipated as being either very poor, or perhaps even negative. In fact, Goldman Sachs even stated that we could lose as many as 1 million! That being said, the result for January was an addition of 425,000 jobs, although it must be stated that there was a huge seasonal adjustment and assumption put into the reading. In other words, we could see a massive revision down the road. Nonetheless, that is the number that we are working with at the moment.
Looking at the size of the candlestick for the trading session, you can see just how volatile things were, and it looks like we are settling down in between the 200 day EMA on the bottom and the 50 day EMA as well. In other words, we are essentially “squeezing” at the moment, which typically leads to a bigger move soon after. The move could be explosive, and to the upside it could open up the possibility of a move towards the $1830 level, which is the top of the gap that you see on the chart.
On the other hand, if we break down below the $1780 level, then the market will fall apart. I must bring to your attention, though, that we have seen one hell of a turnaround during the day, as the buyers came in and picked gold back up. This does suggest to me that gold is going to continue to find a bit of a bid. However, keep an eye on those interest rates in America because if they start to spike again like they did after the jobs report, that is toxic for gold. In fact, that is essentially what happened during the trading session on Friday, but once things calmed down, people were more than willing to jump into the gold market, and that is what you are seeing. It is a relatively neutral candlestick, but it is preceded by a nice hammer. Ultimately, we are “leaning” to higher levels, but you can see that we can go either way based upon what we have seen recently. Pay attention to interest rates and their rate of change; that is going to be the game.
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