By Gold Forecast: Markets Suffer at the Hands of the USD – 14 September 2022
I do not have any interest in trying to buy gold in this environment, especially as the Fed Funds Futures Rate futures market is starting to price in further tightening.
The market breaking down below the $1680 level could open the possibility of a further slide lower, perhaps down to the $1800 level. I do not have any interest in trying to buy gold in this environment, especially as the Fed Funds Futures Rate futures market is starting to price in further tightening. This would work against gold as it makes the US dollar stronger, makes interest rates rise, and suggests that you can earn a positive yield holding paper, instead of paying to store gold. (Yes, I know the retail trader doesn’t have to worry about this so much, but large hedge funds do.)
The 50-Day EMA at the $1750 level is dropping, and it should continue to be important. This is not to say that we cannot rally from here, but I think the market is more likely than not going to continue to see a lot of pressure from above, so therefore I think we are eventually going to continue to see a lot of “fade the rally” type of attitude. Ultimately, this is the market that I think is eventually going to break through the $1680 level if inflation continues to rage. Because of this, the market can very easily find itself dropping to the $1500 level given enough time, but that doesn’t necessarily mean that it’s going to happen overnight.
Pay close attention to the US Dollar Index, and of course the 10-year yield, because both of those have a major influence on what happens next. I am going to fade rallies at the first signs of exhaustion, it would not be a buyer of gold until we get a daily close well above the 50-Day EMA. After that, the market is likely to go looking to the $1800 level, where we currently see the 200-Day EMA was currently hanging around.
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