Will we reach the recent highs? I suspect it is very possible, but it may take some while to get there.
The gold markets rallied a bit on Tuesday as we gapped higher and then went to raise above the candlestick from the previous session. The Monday session had a massive shooting star, so that does suggest that there is a certain amount of resistance in the area that we reached midday. The fact that we pulled back from that area is not a huge surprise, so if we were to pull back from here, I think it is very likely that you should have plenty of buyers underneath to get involved and look for value.
I believe that the gold market is going to go higher over the longer term, and if we can get above the $1980 level, the next target will be the $2000 level after that. That is a large, round, psychologically significant figure that a lot of people will pay close attention to, and it would probably offer a bit of a value play every time we dip. Gold looks very healthy in the last couple of days seems to have suggested that we are trying to do everything we can to break out.
When you look at the chart, you can see that the 50-day EMA sits at the $1960 level, which is basically where the support is in the consolidation area we have been in. Going forward, I think that is going to act as a bit of a “floor” for the market. I see a lot of support that extends down to the $1900 level, possibly even out the $1880 level. The market breaking through all of that would of course be very negative, but I do not think it is going to happen very easily.
The market certainly looks as if it is going to continue to get very bullish, especially if we continue to worry about inflation and the overall economic slowdown. If that is going to continue to be a couple of things that people are concerned about, is very likely the gold will be important, and we need to look for value going forward and take advantage of it as it occurs. Will we reach the recent highs? I suspect it is very possible, but it may take some while to get there.