Gold Forecast: Price Pulls Back Again

We have a bit of exhaustion coming into the market, so it makes sense that we would see the market give back some of the recent gains.

• The gold markets have pulled back again on Tuesday as we are now below the $1780 level.
• Ultimately, this is a market that I think will continue to show bits and pieces of hesitation, but whether or not it breaks down completely might be a completely different question. After all, gold markets have seen a nice rally as of late.

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Noisy Behavior Ahead

However, you also have to keep in the back of your mind that the candlestick from the Monday session was a massive outsized candle and that typically gets a little bit of follow-through if nothing else. The market will continue to see a lot of noisy behavior, because of everything that’s going on in the bond market. Keep in mind that the bond market drives where the gold market will go most of the time, and that has certainly been the case for the last several months.

The gold markets are difficult to trade unless you are keeping an eye on the 10-year yield because if you have the ability to pick up the yield on a piece of paper, you don’t have to pay for storage when it comes to gold. Because of this, you must keep an eye on both charts. Furthermore, you need to keep an eye on the US dollar, because it has a major influence on where we get on, as gold is priced in those very same US dollars.

The candlestick for the trading session on Tuesday was negative, although it certainly was a lot less negative than the previous one. There is a certain amount of support to be found near the $1750 level, so I think we ought to pay close attention to it, because if we break down below that level, then it opens up a move quite a bit lower. On the other hand, if we were to turn around and break above the $1815 level, that could kick off the next move higher, perhaps looking to chase the 200-day EMA above, presently near the $1845 level. At this point, the entire trading world is all about interest rates and bond markets, so you need to pay attention to these yields more than anything else. Ultimately, it does look like we have a bit of exhaustion coming into the market, so it makes sense that we would see the market give back some of the recent gains.

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