Gold markets fluctuated during the trading session on Wednesday as we continue to see a lot of confusion. This has been a very difficult market to trade right along with so many others during the day as the liquidity issues of the crypto market blowing up was felt in multiple assets, as money moved back and forth throughout the system. This is what happens when everything gets correlated; a lot of nonsense can happen as we get “rolling selloffs” like we saw during Wednesday.
From a longer-term perspective, we have broken above the $1850 level, which was important, as well as the downtrend line. It is going to be interesting to see how this plays out, but as long as we can stay above the $1850 level it is likely that we will continue to go higher. At that point, I would anticipate that the market will eventually go looking towards the $1950 level. I do believe this will eventually happen, as traders come to grips with the idea that the Federal Reserve is going to let inflation run much hotter than anticipated. Even though the Federal Reserve has come out and said what they were going to do, the markets do not believe them.
If they do stay loose for longer, it is very likely that the US dollar will get hurt, and that in and of itself could lift gold. Furthermore, you need to pay close attention to the bond yields in America, because if they do spike too quickly to the upside, that might work against the yellow metal. However, if it is a relatively slow climb, then it is possible that gold could continue to go higher despite the fact that rates might be rising.
If we turn around and take out this downtrend line and go below it again, I think the next hurdle the market will face is what we do at the 200-day EMA, which is at roughly $1800. One thing is for sure: we're very likely to hear a lot of noise in this general vicinity and would be well-served by keeping our position size relatively small. If the market does move to the upside, there should be plenty of time to build up a position for the longer-term move.
