Gold at crucial levels
- Gold markets in large flag
- Fibonacci ratios holding
- 50 day EMA moving at speed
Gold markets have been very active this year. They were gaining quite drastically until the last several weeks. Perhaps the pullback has been more or less a bit of digestion. The month of August alone was worth 15% in gains. That’s a huge move in any market, let alone Gold which is one of the larger contracts traders get involved with.
There are several trendlines worth paying attention to in the market. Not the least of which would be the two that make up the flag marked on the chart. Ultimately, the market will need to make a decision. While the flag is of the bullish variety, that doesn’t necessarily mean that it has to breakout. However, there are strong arguments to be made for breaking the top of it. This would be a very bullish sign, perhaps sending this market to $1650. After all, it would, in fact, be a clearance of a downtrend line. The measured move of the flag pole suggests that level as a target.
Other technical factors
There are other technical factors to take into account as well. The 50 day EMA is currently slicing through the last several candlesticks and flattening out. This is rather bullish when you think of the fact that the larger technical pattern is negative. As long as the 50 day EMA doesn’t slope lower, it does show the possibility that the market could break out. If that’s going to be the case, then the $18.75 level would be an area of interest as it was a recent high that tested that trend line. Ultimately, that would be the initial target on a breakout to the upside.
Another thing to pay attention to is that the market has accepted the 38.1% Fibonacci retracement level as support as seen by this triangle, so a break higher from here would tie-in quite nicely with Fibonacci trading in general. That being said, the exact opposite can be true as well, if that level gets broken it would signal much more bearish pressure in this market and have traders selling.
Keep in mind that the precious metals markets are often influenced by geopolitical concerns, and economic growth or weakness. There are a lot of things to worry about in general right now so the fact that precious metals could take off to the upside would not be a huge surprise.
The market has been in a long term trend to the upside for several different reasons, not the least of which would be central bank easing which shows no signs of slowing down. Just last night the Bank of Japan suggested that much more quantitative easing was coming out of that central bank, and the Federal Reserve, of course, is set to start cutting rates again in October. That being said, gold should have a relatively strong case for buying ahead. However, waiting for that downtrend line is going to be crucial. Otherwise, the market could break down rather drastically if the triangle kicks off, but so far it has avoided that.