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The market is more likely than not going to continue to drift lower, perhaps trying to test the lows near the $1680 level, but I would be surprised to see it go any lower than that anytime soon.
- Gold markets got hammered during the trading session on Friday after Jerome Powell gave a very hawkish speech at Jackson Hole. At this point, the US dollar looks like it’s reasserting its dominance, and that of course he’s going to have a major influence on where we go next.
- This is a market that I think given enough time may retest the $1720 level, possibly even lower than that.
- The market has been very noisy and had tried to rally but now it appears that people are finally getting it through their heads that the Federal Reserve is going to have to stay rather tight going forward.
This should bring interest rates higher, and it should continue to drive the US dollar higher. The US dollar being stronger obviously works against the value of commodities priced in that same US dollar, but it is worth noting that the market did not necessarily meltdown during the day, it just lost 1.2%, well within the tolerance of normalcy.
Market Likely to Drift Lower
The market is more likely than not going to continue to drift lower, perhaps trying to test the lows near the $1680 level, but I would be surprised to see it go any lower than that anytime soon. If it does, that opens up a massive amount of selling pressure that could send gold down to the $1500 level.
If the market rallies from here, the $1760 level will be the first carrier, followed by the 50 Day EMA and then the $1800 level. The $1800 level is an area that previously had been supported, and of course, we have seen a lot of resistance just recently. Because of this, the market will continue to be one that you have to watch through the prism of a downward trend, and it’s not until we clear the 200 Day EMA above that I would assume things have changed at all. The market breaking above that level then opens up the possibility of a move to the $1850 level. Breaking above that level then opens up the possibility of $1900 and more of a “buy-and-hold” type of situation. I do think the gold eventually takes off, but we are nowhere near that right now with the central bank still out there fighting inflation. Higher rates equals lower gold.
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