Gold initially attempted to advance during the week, but encountered sufficient resistance near $1680 to retreat once more. Remember that the US dollar has a significant impact on gold, and as it increases, gold normally falls. If we break below the bottom of the weekly candlestick, there is a chance that we may target the $1620 level, where a double bottom has formed. If we were to fall below that point, it is likely that we would go considerably lower.
I don’t think this to be the case in the near future, but if the Federal Reserve sounds more hawkish than expected on Wednesday, it might be the spark for a dramatic decline. Obviously, it works in both directions, so if the Federal Reserve were to suddenly sound obvious, gold prices may surge.
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I believe the only thing you can bank on is a great deal of volatility, but given enough time, we will have to make a decision with a longer time horizon. It appears that, in the near term, we are content with moving back and forth and essentially doing nothing. Nevertheless, it is evident that we are much more comfortable moving lower than higher at the moment, therefore the majority of traders will view this through the lens of shorter-term charts in order to capitalize on the strength of the US dollar and short the gold market.
Having said that, a little bit of patience probably goes a long way in this scenario, so bear in mind that there is a lot out there that can move the market in either direction, and therefore you will need to be most cautious about your position sizing.