Gold markets continue to consolidate

Alan Penny

1 April 2019

3 min read

Gold markets continue to consolidate overall during trading on Monday as we come back from the weekend. It seems as if the $1300 level will continue to offer a lot of psychological importance, from both support and resistance. At this point, it looks as if the market is going to continue to be noisy as the US dollar is being thrown around quite a bit also.

Round numbers

You should always pay attention around numbers, and pretty much any market you trade. Gold is no exception as the $1300 level will offer a lot of order flow. Ultimately, this is a market that has been very volatile as it moves right along with the US dollar. The US dollar of course is currently strong but as we are getting less than favorable economic signals out of America, we could see a shift in that rather soon. The question now is whether or not that greenback strength continues. If it does not that should be good for gold in general.

Gold tends to move in $25 increments, as shown on longer-term charts. The $1300 level is followed by the $1325 level to the upside and the $1275 level underneath. You should keep those levels marked on your chart as they should be important.

gold daily

gold daily

Gold as a fear indicator

Gold can sometimes be thought of as an indicator of fear, as it will quite often be bought when there is a lot of concern out there in order to protect wealth. At this point, the market will probably go looking towards the $1325 level above, which is significant resistance. However, that’s not to say that it’s going to be easy or quick, it’s probably going to be very volatile and choppy to the upside. So far, I do like the idea of buying gold as the US dollar is most certainly overbought and we are starting to see bond markets sell off a bit which could bring down the desired on greenback’s as well.

The alternate scenario

If we do see a sudden rush back into the bond markets in America, you could see the US dollar picked up strength, thereby driving the value of gold lower and down towards that crucial $1275 level which currently houses the 200 day EMA or thereabouts. I would expect a lot of support in that area, but a break down below there could of course open the door to the $1250 level next.

The main take away

Essentially, this is a market that is going to be very noisy as it typically is. However, gold does tend to have a lot of different things driving it at the moment, not the least of which will be geopolitical concerns, which ironically picks up the value of the US dollar. This is why we are starting to see so much choppiness in this market and therefore confusion should still reign. Longer-term though, it still looks as if it is a bullish market and we should continue to find value on dips.

Written By
Alan Penny

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