As we are now beginning to tear in an impulsive move, gold markets have rallied a little during the trading session on Wednesday. In spite of this, it is worth noting that the gold market has recently received a slight boost as economic data in the United States continue to indicate that the economy is declining. Traders are anticipating a recession because they believe the Federal Reserve will be compelled to reduce interest rates sooner than previously stated. If that proves to be the case, it is likely that gold will continue to appreciate as the U.S. dollar suffers some losses.
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At the moment, gold appears to be aiming for the 2100 level, which is a large, round, psychologically significant number. This raises the possibility of a pause in that area, but as long as the economic situation continues to deteriorate, it’s likely that bullish pressure will persist.
As gold continues to outperform everything else, it likely has more to do with the concept of an economic slowdown and wealth preservation than with any other factor. Ultimately, it appears that the $2000 level below will be a significant support level, as it is not only psychologically significant but also an area that acted as a price magnet as we moved back and forth multiple times.
Clearly, we are in a bullish market, so there is no reason to attempt to resist it at this juncture. Currently, we are a little bit overbought, but gold markets can be quite impetuous at times. A short-term pullback makes a lot of sense as it could give us a bit of a respite and allow more investors to enter the market, but at this point it appears that this is a generally one-way trade. Clearly, Gold will continue to experience a great deal of purchasing pressure, but it is important to note that on the longer-term charts, there is still a small amount of noise above, so this may also help facilitate the retracement.