We may have gotten a bit ahead of ourselves previously, but now looks like we are trying to form a bit of a base.
The gold markets fell a bit on Tuesday to pierce the support region that I have marked on the chart. The market will continue to be very noisy, based upon the fact that we have seen so much in the way of geopolitical and inflationary concerns. Ultimately, this is a market that will test this area to see whether or not the buyers are going to continue to lift the metal. This has been a very strong move higher, so this pullback is probably good.
The 50-day EMA sits just below and is curling higher. This suggests that momentum is still very much on the upswing, so it should be kept in the back of your mind. The $1880 level underneath is the bottom of the range of support, so it is really not until we break down below there that I would become negative. I think at this point, it is very likely that the markets will continue to see this overall area as important from a longer-term standpoint.
One of the biggest problems that we have had in the gold market recently has been that the bond markets have been selling off quite violently, and rates continue to rise in the United States. When you look out the bond market, it has been overdone, so if yields drop in America that may help gold as well. After all, if you can gain interest by simply holding paper instead of messing about with gold and those storage fees, it does tend to take the shine off the metal itself.
If we were to break down below the $1880 level, at that point I would consider the overall trend broken, so I would be short of the gold market. I would anticipate a move towards the $1850 level, and then possibly down to the $1775 level over the longer term. There is the 200-day EMA between here and there, but that will probably be a relatively minor event unless we get a fundamental reason to hang on to it.
On the upside, breaking above the $1950 level allows the gold market to go looking towards the $2000 level, and then possibly even the highs again given enough time. Obviously, we may have gotten a bit ahead of ourselves previously, but now looks like we are trying to form a bit of a base.
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