Gold markets trying to break out

Kate Leaman Kate Leaman

8 April 2019

Gold markets rallied rather significantly during the trading session on Monday, especially in early north American trading. We had broken above the $1300 level which of course has a certain amount of psychological importance attached to it, but not only that we managed to break above the top of a couple of hammers from the daily chart previously.

$1300

gold chart

Gold daily chart

The $1300 level of course is a large, round, psychologically important figure, but we also had seen a lot of resistance in that area on short-term charts. When you look at the daily chart, you can see a couple of hammers that had preceded this move during the day on Monday, and of course with the US dollar losing some strength it makes sense that this isn’t necessarily a demand for gold play, but probably one that is more of a “anti-dollar” play. The EUR/USD pair is currently sitting at the 1.12 level, and bouncing from that significant support, showing greenback weakness.

This should continue to attract money into the gold market, especially if we can get some type of relief in the bond markets in the United States. They have been rather strong as of late, but as demand for bonds drops, that should weaken the US dollar as well.

Major support below

Not only is there interest in the $1300 level, or the pair of hammers that formed the Thursday and Friday candles, we also have the $1280 level underneath which has been massive support as well. The 200 day moving average is just below that level as well, so it’s really not until we break down below the $1275 level, or wherever the 200 day EMA is at the time, that sellers will have taken complete control. Having said that, if you get somewhat creative you can make a bit of a slanted “head and shoulders pattern”, if we do get the break down.

It’s very likely that the breakdown would be accompanied by some type of major negativity in global risk demand, probably seen in the equity markets, bond markets, and Forex markets simultaneously. If that’s going to be the case that obviously gold will be affected by a rush into the US dollar.

Upside targets

With the piercing of the resistance, a lot of selling pressure will have been updated. The question now is whether or not we can continue to rally? If we do, it’s very likely that we go looking towards the top of the breakdown candle from last week, sending Gold towards the $1315 level. Above there, the next major area would be the $1325 level as gold markets do tend to pay close attention to those $25 increments. Besides that, it was the scene of a recent high.

Although we made a low or high when we hit $1325, if the hammers hold that we just formed last week we have made a higher low. In other words, the buyers are starting to step in and take control yet again. All things being equal, it’s likely that we will go looking towards the upside targets, not so much the downside ones.


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