The market breaking out from here would be a continuation of what we had seen for a while, which has been a pro US dollar market.
The size of the candlestick is rather impressive, but we have seen these impulsive moves before. After all, we are in a major downturn, and I think that continues to be something that people need to pay close attention to. Furthermore, the US dollar continues to strengthen overall, so if that’s going to be the case, there is a little bit of a natural hesitation for gold to go higher. Furthermore, you need to pay close attention to the interest rate situation in America, because it continues to climb, which will also work against gold given enough time.
The support underneath still holds, if we were to break down below what looks like a triple bottom, we could send this market down to the $1600 level, perhaps even down to the $1500 level. Ultimately, the market continues to see a lot of reasons to favor the US dollar, and that is going to be the case in general. The market breaking out from here would be a continuation of what we had seen for a while, which has been a pro US dollar market.
On the other hand, if we were determined to take out the $1720 level, then I think you have a real argument for some type of recovery for gold that could last quite some time. I don’t see that happening anytime soon, so now I am sitting on the sidelines and waiting to see whether we have enough resistance to start shorting again. I don’t have any interest in buying this market based upon one candlestick that goes against the overall momentum of the longer-term market. I think this is a market that will suffer the same issues that so many others will when it comes to US dollar strength, which has been like a wrecking ball.
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