Looking at this chart, and looking at the history of Jerome Powell, I can almost guarantee that he will probably make things worse, not better. 

• The gold spot market rallied a bit during the trading session on Thursday, to reach above the $1760 level. The market is likely to continue seeing a lot of noise.
• Gold markets are waiting to see what happens on Friday morning, as Jerome Powell has a speech at the Jackson Hole Symposium.
• Traders are trying to figure out whether the Federal Reserve is going to reiterate its hawkish attitude, or if it is going to have to pivot. After all, there is somewhat mixed economic news out there, but at the end of the day, inflation is still a big deal.

The 50-Day EMA sits above and is offering a significant amount of resistance, so I think a lot of traders will be paying attention to that technical indicator. Above there, we have the $1800 level, which is where we had pulled back from previously, with the 200-Day EMA sitting above there. All of that could cause a significant amount of resistance, so do not be surprised at all to see a huge fight if we try to rally.

Traders Waiting for Jerome Powell’s Speech

Underneath, the $1720 level has offered short-term support, and I think a lot of people will be looking at that number with great interest. If we were to break it down below it, it’s possible that we could go down to the $1680 level. Anything below there opens a significant amount of potential selling pressure, and it’s possible that we could drop all the way down to the $1500 level. It’s going to be difficult to trade this market in the short term, because you are going to have to pay close attention to the bond markets and interest rates, or perhaps more specifically put, pay attention to how traders interpret whatever it is Jerome Powell says.

Looking at this chart, and looking at the history of Jerome Powell, I can almost guarantee that he will probably make things worse, not better. Clarity is not exactly his forte, so I anticipate that we have sloppy trading ahead of us. However, I do think that the support area underneath should be rather significant, so it’s going to take a lot to send the market through that floor. Another real possibility is that we are simply going to grind in this overall consolidating pattern.

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Gold markets rallied a bit during the trading session on Tuesday to show signs of life again as the market has threatened to break above the $1750 level. If you can do that, then it’s likely that we could go looking into the 50-Day EMA above, which is near the $1775 level.

Looking at this chart, it’s obvious that the market has seen a lot of volatility and negative pressure, so even if we do rally, I think we probably have a lot of work to do before we start to turn around and rise for the longer term. Interest rates in America continue to rise, and that does work against the value of gold. So does the US dollar rising, although all of these things can go higher at the same time, depending on the situation that is going on. At this point, it looks to me as if gold is trying to at least get a short-term rally going, so pay close attention to the next couple of days and the statements coming out of the Jackson Hole Symposium, because it could have a lot to say as to where we are going next.

Underneath, I think the 6 $1720 level could be short-term support, but if we were to break down below there, it’s almost a given that we will test the lows again. Breaking down below the lows that we made several weeks ago could open up even further selling pressure, which would probably coincide with interest-rate spanking, and of course, the US dollar strengthening. Because of that, you need to be aware of the fact that we have a lot of concerns coming out of the bond market.

It All Depends on Interest Rates

• If the rates in America continue to rise, it will make bonds a lot more attractive than gold, which of course you have to pay to store.
• There is a lot of resistance above that if we broke through, you’d have to consider a trend change, namely, the $1800 level and the 200 Day EMA. If we can clear all of that, then gold becomes more or less a “buy-and-hold” asset.
• The only thing you can count on in the short term is going to be a lot of noisy behavior and therefore you need to be cautious about the position size that you put on in this market.

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• The gold markets have fallen a bit during the day on Monday to drop about two-thirds of a percent in the spot market.
• The market now looks as if it is paying close attention to the $1725 level, an area that was previous resistance.
• This is a market that is going to move counter to the US dollar and interest rates, as is the longer-term trend.

When you see this chart, you can also see that we have been in a long-term downtrend, and it’s worth noting that the US dollar itself is strengthening based on tightening concerns. With the Jackson Hole Symposium going on this week, it does make a certain amount of sense that traders are focusing on the speeches of central bankers. If they are going to continue to tighten monetary policy, that works against gold, due to the fact that the interest rates will be higher, and therefore it’s easier to make a return holding paper than it is storing gold.

See where Gold is headed next

The candlestick for the trading session on Monday is relatively negative, but it’s not necessarily something that I’m overly concerned about. I believe that the market is going to not only pay attention to the $1725 level, and then again at the $1690 level. That’s an area that needs a hold in order for gold to perhaps keep its head above water. If we were to break down below that level, then the market is likely to go looking to much lower levels, with perhaps an eye on the $1500 level.

If we can try to break above the $1770 level, we may make a run toward the $1800 level above, which is a large, round, psychologically significant figure, and an area that we have seen the market pullback from as well. All things being equal, this is a market that has been in a downtrend for a while, and even though we had a nice rally recently, it did not change much. In fact, it’s not until we break above the 200 Day EMA, which is currently hanging around the $1820 level, that I would consider this market to be changing over into a longer-term bullish trend. This is a market that I think will remain noisy, as there are a lot of crosscurrents going on at the same time.

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In the short term, it looks like a pullback is more likely than not, so I would not be surprised to see traders take profits heading into the weekend.

• The gold markets have gone back and forth during the session on Thursday, as we are sitting just below the $1800 level.
• Keep in mind that the gold markets have hit a major area of resistance, and it would make a certain amount of sense that “market memory” comes into the picture.
• If we break down the 50 Day EMA underneath, then it could open up further selling.

 

Looking at the bond market, interest rates had dropped quite significantly, and that makes gold much more attractive as yields in the paper market do not offer as much of a return. That being said, I would be a bit hesitant to jump into this market right away, because there’s so much noise in the bond market. After all, the bond market drives everything, as it can give you an idea as to whether or not there is a lot of risk-taking out there, or if people are running for safety.

The one nice thing about the candlestick during the day on Wednesday is that breaking above it is a clear sign of strength, and a lot of people would probably jump into the market at that point. The $1800 level of course is a large, round, psychologically significant figure, and it would attract a lot of headline noise. However, it’s not really until we break above the $1815 level that we clear all of that. If that happens, I would anticipate the gold would go looking to the 200-Day EMA.

On the other hand, breaking down from here could open up and move down to the $1750 level, which is an area that previously had been resistant. In general, when you look at this market you can see that there has been a lot more volatility as of late, and it suggests that we are in fact going to continue to see noisy behavior, perhaps a pullback. We are still very much in a downtrend, and you should keep that in the back of your mind. If yields start to rise again, that will put a lot of downward pressure on gold, just as the opposite could send it higher. In the short term, it looks like a pullback is more likely than not, so I would not be surprised to see traders take profits heading into the weekend.

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The candlestick itself is neutral, but it is also at a major historically important level, so I think you need to look at it through that prism.

• Gold markets were very noisy on Wednesday as the CPI number came out a bit cooler than anticipated.
• The market has been rising for a while, so it does make sense that we are running out of momentum.
• CPI in the United States came out at 0.0% month over month, and Core CPI came out at 0.3% instead of the expected 0.5%.
• This has traders looking at the possibility of the Federal Reserve not having to tighten monetary policy as rapidly as before.
• Ultimately, this is a market that will have a major influence on where we go next.

Support at 50-Day EMA

The 50-day EMA sits just below the bottom of the daily candlestick, and it suggests that there could be a little bit of support underneath. If we were to break down below that level, it would say a lot more than the initial rally started during the trading session. The fact that we gave back quite a bit does suggest that there is more trouble out there than people are aware of, especially as inflation is still running at about 3 ½ times what the Federal Reserve wants.

With that being the case, it’s probably only a matter of time before gold sells off, but if we were to break above the highs of the trading session on Wednesday, it’s possible that the market could go higher, perhaps reaching the 200-day EMA above. Breaking down below the bottom of the candlestick for the trading session on Wednesday shows that perhaps the market has peaked, at least for the short term.

Ultimately, the market is likely to continue to see a lot of volatility, but it should be noted that we are still very much in a downtrend, although we are trying to break out. If we do break down from here, the $1750 level underneath would be a potential target. The candlestick itself is neutral, but it is also at a major historically important level, so I think you need to look at it through that prism. Until things change, the gold market still needs to prove itself from a longer-term standpoint. At this junction, I believe that the next impulsive candlestick will tell us where we are ready to go for a bigger move.

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By the end of the Wednesday session, we could probably have something in the realm of clarity that we can start following for a bigger move.

• Gold markets rallied a bit Tuesday as we wait for the crucial CPI numbers.
• CPI will come out on Wednesday, and it could have a major influence on what the Federal Reserve does next, as Wall Street ways to see whether or not it gets cheap or free money.

The 50-day EMA sits just below current trading, and therefore it’s potentially a short-term support level. If we break down below the 50 Day EMA, then it’s possible that we could go looking to the $1750 level. That’s an area where we had seen previous resistance, and it’s likely that could come in and offer a bit of “market memory” and make the market react to it.

If we break out above the $1815 level, then it’s possible that the market could go looking to reach the 200 Day EMA which is near the $1850 level. The 200 Day EMA of course would cause quite a bit of resistance, so breaking above that would kick off a lot of algorithmic trading. I think the only thing that you can count on now is going to be a lot of noisy behavior though, so given enough time I think that this is a market that needs to make a bigger move.

Waiting for CPI Numbers

The CPI numbers coming out hotter than anticipated will have people freaking out, running to the US dollar as the Federal Reserve will have to become much tighter and more aggressive with its monetary policy. Quite frankly, the Federal Reserve keeps telling everybody that it is going to be tighter and more aggressive, and therefore it’s a bit surprising that the market is trying to argue the point. However, this is a market that I think given enough time will either start to fall toward the low again or perhaps break above that crucial 200 Day EMA. By the end of the Wednesday session, we could probably have something in the realm of clarity that we can start following for a bigger move. I think that the real signal is probably at the end of the day on Wednesday. Between now and then, it’s going to be nothing but a lot of choppiness and sideways behavior. The market being between the 50 Day EMA and the 200 Day EMA suggests that we are getting a lot of crosscurrents at the same time.

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This remains a market you need to be very cautious about position sizing.

• Gold markets fell hard Friday as the jobs number came out much stronger than anticipated.
• Because of this, the market looks likely to continue dropping a bit, as the interest rates in America started to climb.
• Remember, interest rates rising typically is bad for gold, because it becomes much easier to hold paper than it is to store physical gold.

Looking at this chart, it’s obvious that the $1800 level is a major resistance barrier, so I think we need to pay close attention to it. If we do break above here, then I think you should start to take a significant look at whether or not gold can continue to go higher. The $1815 level would wipe out the resistance and support candle that we had broken through the $1800 level with, opening up the possibility of the market going much higher. At that point, I think that we could see this market try to reach the 200-day EMA which is sitting just below the $1840 level.

On the downside, if we break down below the lows of the Friday session, it is very likely that we will attempt to get to the $1750 level, perhaps even the $1720 level. Ultimately, this is a market that I think continues to see a lot of volatility, but that’s nothing new for gold. Pay attention to the US dollar, and the US Dollar Index, as it tends to have a very negative correlation.

Higher Rates, Lower Gold

The market will continue to be very noisy, but I think the one thing that probably saved gold for the day was the fact that we were heading into the weekend. Ultimately, it’ll be very interesting to see how this plays out because we have been in a very negative trend for a while, but obviously, things could change rather rapidly. Pay close attention to the 10-year note in the United States, because has a major effect on where we go next. Higher rates, lower gold. That’s not always the case, but it seems to be the case at the moment. If we were to break higher, although we could go higher for a longer-term move, it will probably be very noisy and choppy to say the least. Ultimately, this remains a market you need to be very cautious about position sizing.

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As far as taking off to the upside, we would need to see the US dollar lose strength, yields in America drop drastically, and this market break above the $1815 level in the futures market, or the $1805 level in the spot market.

• Gold markets went back and forth Wednesday as we continue to levitate just below a major supply area.
• Because of this, the market is likely to continue struggling, and the fact that the Friday session is the Non-Farm Payroll announcement probably throws even more noise and nonsense into the market.
• Given enough time, I think this is a market that will have to make a major decision rather soon.

Keep an Eye On the 10-Year Yield

One of the major drivers of this market is the bond market, and what yields are doing. The 10 year yield did spike over the last couple of days, but it appears as if it is trying to fall back down. If that is in fact the case, that will be bullish for gold, but we have to worry about the $1800 level above as a major barrier. The $1800 level has historically been supported, so “market memory” could come into the picture, especially as the 50-day EMA is slicing through it. With that being the case, I think it’s worth noting that the candlestick for the previous session was a shooting star, and although we have recovered a little bit during the trading session after initially falling on Wednesday, it’s hardly a confidence-inspiring candlestick.

If we break down below the $1750 level, then it’s very likely that we will test the $1725 level next. After that, then we would be looking at the $1700 level. Notice that we did bounce from the $1680 level recently, which is an area on longer-term charts that has been important more than once. Because of this, I think what we are getting ready to see is a potential breakdown if that were to be violated. Granted, it will take quite some time to get there, and of course we have the jobs number between now and then to get things moving, but you should probably keep this in the back of your mind due to the fact that we have seen so much in the way of noisy behavior recently.

As far as taking off to the upside, we would need to see the US dollar lose strength, yields in America drop drastically, and this market break above the $1815 level in the futures market, or the $1805 level in the spot market.

 

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This is a market that is a little stretched in the short term, so a little bit of a pullback would make a certain amount of sense regardless.

• Gold markets rallied significantly over the last several days, especially due to the interest rates in the United States tightening.
• At this point, it looks like gold continues to move against that move in a negative correlation, as you would expect.
• Because of this, I believe the market is more likely than not going to continue to see quite a bit of volatility as bond markets are trying to figure out whether or not the Federal Reserve is going to start loosening, or if they will continue to fight inflation.
• A lot of this is going to come down to inflation numbers, so you will have to pay close attention to economic announcements.

Pay Attention to $1800

The $1800 level above is a significant resistant barrier, and it now has the 50-day EMA hanging about as well. That being said, the market is going to pay attention to the area quite intensely, as there is a lot of market memory in that vicinity due to the fact that it had been so supportive in the past. Because of this, I think it all lines up for a nice barrier that’s going to be difficult to break above. Whether or not we can break above $1800 is a completely different question, but at this point, I would suspect that it is going to be rather difficult to get beyond. If we do, it’s obviously an extraordinarily bullish sign.

On the other hand, if we turn around and break down below the $1750 level, it’s likely that the market could break down to the $1720 level, possibly even down to $1680 after that. That is an area where a lot of people will be paying attention because it was such massive support in the past. Breaking down below there then would open up a massive amount of selling pressure. On the other hand, a lot of this comes down to the US dollar as well, so pay close attention to that. We have seen a little bit of a giveback on the greenback, so it’s possible that we could see gold continue to move in a negative correlation. Ultimately, this is a market that is a little stretched in the short term, so a little bit of a pullback would make a certain amount of sense regardless.

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We would need to recapture all of the real estate given up on Tuesday this week to show a significant change in attitude.

• Gold markets initially shot higher on Friday but gave up gains again.
• The price seems unable to hang onto positive momentum.
• At this point, the market looks as if any rally will be sold into.

But even if we do rally from here, I would anticipate that there is a lot of resistance at the $1800 level as well, which is an area that has been imported multiple times in the past, as well as an area that carries a lot of psychology attached to it.

If we were to break down below the lows of the last couple of days, then it’s possible that the market could go looking to the $1700 level underneath, which is the next major, round, psychologically significant figure. Keep in mind that the US dollar has a directly negative correlation to gold markets most of the time, and interest rates most certainly do. As interest rates continue to climb in the United States, that will have a negative effect on gold.

Bounce Expected, But Will Gold Recover?

That being said, I would anticipate some type of bounce sometime soon, as we had fallen apart so rapidly. The alternate scenario is that we simply go sideways, which is an even more bearish turn of events because it shows that nobody’s really willing to step in and pick this market up. If interest rates in America continue to climb the way they have, it’s very difficult to imagine how gold will do well. With that being the case, I like the idea of fading rallies more than anything else, but I would short the market if it broke down from here.

As far as the market changing its overall attitude, we would need to recapture all of the real estate given up on Tuesday this week to show a significant change in attitude. If and when we get that, then the market will have to deal with the 50-day EMA as well as the 200-day EMA. In other words, it’s going to take a lot of effort to recover from here. The biggest driver will be expectations coming out of the Federal Reserve, which right now looks likely to be very tight going forward, thereby putting the interest rate pressure on the gold market in general.