Gold Forecast: Attempting to Save Itself – 19 September 2022

Gold markets bounced a bit during the trading session on Friday, after breaking through major support on Thursday. While this is a somewhat encouraging sign, there is still a lot of resistance above, and you would have to think that a lot of people were more than willing to get out of gold after trying to buy the bottom. As soon as they get close to being breakeven, they will jump out of that position as it is extraordinarily uncomfortable to be underwater in this type of environment.

That being said, you need to see some type of exhaustion candle in order to start shorting. On the other hand, we could just simply turn around and break down through the bottom of the candlestick from the Friday session. If that happens, then it’s likely that we continue to see a gold selloff. In that environment, and I do believe that’s the environment we will find ourselves in, it’s likely that we go down to the $1500 level over the longer term. We will get the occasional rally, probably in line with the US dollar losing a little bit of the ground from time to time. Nonetheless, both the US dollar and the gold selling pressure should continue going forward, as we should see a lot of momentum continuing.

On the upside, the $1720 level should be a bit of a barrier, right along with the 50-Day EMA which sits above there and is starting to drop.Regardless, you need to keep an eye on not only the US dollar but perhaps more importantly the US bond markets, because if interest rates continue to climb, that will be another sign that you could see even more downward pressure on precious metals.Regardless, I don’t have any interest in trying to fight this market, and you can see that the potential double bottom that I marked on the chart has now been blown through.

It is probably worth recognizing that the $1680 level that had marked the potential support goes back as being important for the last several years. With that in mind, it’s a serious breach of support, and these typically do not happen in a vacuum. Because of this, I am looking to short this market until something fundamentally changes. Any rally at this point in time that show signs of exhaustion should be thought of as a potential opportunity.

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