During Monday’s trading session, gold prices retreated slightly to challenge the $1750 level. By reversing as we have, it appears that the market will threaten to surpass the 200-day exponential moving average. If we were to remove this, it is probable that the market would target the $1800 level. There appears to be a significant amount of “panic purchasing” on the market, primarily as a result of the volatility of the US dollar.
Keep in mind that last week’s CPI statistics were weaker than anticipated, which added gasoline to the fire of a market attempting to break out. Whether or not it can truly take off is an entirely separate matter, but if we were to take out the $1800 level, you would have to see it through the lens of a market that has reversed direction. On the other side, if the price were to reverse direction and break the $1750 level, it is likely that the price would drop to the 50-Day Exponential Moving Average, which is located near the $1700 level.
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You will need to pay close attention to interest rate fluctuations, as gold’s performance normally deteriorates when interest rates rise. Obviously, the reverse is the case. Also, keep a close eye on the U.S. dollar, as it has a large negative association with the gold market. In general, we are slightly overbought, so it seems reasonable that we would experience a pullback at the very least. As a result of the Federal Reserve’s reaffirmation of its intention to combat inflation, I believe this rally will be short-lived.