Still stuck in moving average compression
Keep in mind that if yields in America go up, it works against the value of gold.
The gold market fluctuated again during Tuesday’s trading session as we are stuck between the 50-day EMA below and the 200-day EMA on the upside. The candlestick ended up being very neutral, and that tells me that the market simply has nowhere to be. This is probably not a good sign for those looking to be bullish on gold as it looks like the recovery is starting to lose some momentum at this point.
To make matters worse, the US dollar seems to have gotten a bit of relief during the trading session, which can hurt the value of gold itself. In addition, you should also pay close attention to the yields of the 10-year bond, because if they recover significantly, people will see the US dollar as very attractive. On the flip side, if we continue to see a lot of concerns out there, more money can be pumped into the US dollar than anything else, and that should work against the value of gold.
On the upside, if we were to break above the $ 1800 level, we would not only eliminate the most recent resistance but also the 200-day EMA and a large, round, psychologically significant number. Closing on that on the daily chart opens up the possibility of a move up to the $ 1,850 level, and then eventually to the $ 1950 level thereafter. If that happened, you’d think the US dollar would be hammered and suddenly people would be more concerned about inflation than anything else, but you should too keep in mind that if yields in America go up, it works against the value of gold because that means you can get a “risk-free rate of return” by cutting coupons in the bond market instead of paying for storage here.
If we turn around and fall below the $ 1750 level, then it is likely that we could see a movement down to the $ 1700 level, and maybe even the double bottom below. Compensation that could open a move down to the $ 1,500 level, which is the next big round and psychologically significant number.