Gold markets have fallen rather hard during the trading session on Friday to reach down to the $1800 level. The $1800 level is an area where we have seen a lot of noise in the past, and where we had taken off from. Because of this, is very likely that the market will be looking for this area as an opportunity to stabilize, so it will be interesting to see how this plays out. If we can break above the top of the candlestick, then it is possible that we could go looking to the 200 Day EMA at the $1860 level.
The market continues to see a lot of noisy behavior, mainly due to the US dollar strengthening. The US dollar strengthening and then of course interest rates rising in the United States will continue to be a major sell-off in the bond market. As long as the interest rates in America continue to rise, it is possible that the gold market continues to suffer. However, in the last couple of days, we have seen the bond market rally a bit, and that could be the beginning of something. It would tie in quite nicely at the $1800 level, so it is likely that we will see some type of reaction.
If we do break down below the lows of the day, that could open up a bit of a trapdoor and send this market much lower. In that scenario, we would probably have massive movements in the bond market, and of course the US dollar. That being said, even if we are trying to form a little bit of a bottom in this area, it is going to take some time. With that in mind, I think you are looking at short-term trading at best, and you will have to keep in the back of your mind that there is a lot of potential noise out there when it comes to geopolitics, inflation, and numerous other issues in the currency markets. Because of this, you need to be very cautious about your position sizing and recognize that if the trade is working against you, you need to get out of the way quite quickly. Gold can be very volatile, and one has to wonder whether or not we rallied a bit late on Friday due to profit-taking?