Keep building a case for a bottom
In the short term, the US dollar is overbought, which could be reason enough for a short rally.
- Gold markets continue to be highly volatile, initially dipping in Wednesday’s trading session only to turn around and show signs of life again.
- The $1,720 level is under threat, and if we can break above the $1,725 level, gold may rally a bit for a longer-term move.
- After all, you can argue for a “double bottom”, and you can see that this could be a major reversal based on the fact that just below the previous noise we saw there was a level of longer term support.
As long as we remain above the $1680 level, it is possible that we will see a reversal in the market, at least for a short-term move. All things being equal, gold will likely continue to see a lot of interest, but that doesn’t necessarily mean we’ll rally right away and keep shooting straight into the air. I think it’s a market that continues to be very noisy, but dips can provide buying opportunities. This will be especially true if interest rates in America begin to decline.
Gold could benefit from an overbought dollar
If we were to fall below the $1680 level, it is likely that the market could collapse quite significantly, possibly reaching the $1500 level. The $1500 level is an area that would get a lot of attention, but if we break below it could open the floodgates. I don’t necessarily think it will, but ultimately it’s a market that will eventually find its footing, but the rates are playing against it right now. When looking at this chart, you should also keep in mind that sooner or later people will start looking at this as a potential security game, and of course, in and of itself, people will look at it.
Despite what you may have been told, gold and the US dollar can rise at the same time in the right environment. Whether or not that’s the right environment at the moment remains to be seen, but it’s definitely an environment that’s going to cause a lot of trouble in the future, so we could see both get a lot of attention. In the short term, the US dollar is overbought, which could be reason enough for a short rally.
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