Gold is stabilizing after Tuesday’s sharp sell-off, trading between $4,000 and $4,200. A break below $4,000 could trigger a decline toward $3,800, while sustained consolidation may support a gradual recovery in the uptrend.
- Gold initially plunged during the trading session on Friday but then turned around to show signs of life.
- All things being equal, this is a market that I think is continuing to try to sort out whether or not we’re still in an uptrend.
- After having that massive sell-off on Tuesday, we’ve really seen stable prices, and that’s a good sign. Stability is the first step to recovery.
If we break down below the $4,000 level, then the market really falls apart and could end up dropping perhaps to the 50-day EMA, maybe even the $3,800 level. The market had been in a pretty significant ascending triangle, which measured for a move to $3,800, so I think that is an area of extreme interest.
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The $4200 Level Matters
That being said, we are trying to turn things around during the session, and that is a good sign. The $4,200 level should end up being a barrier, so keep that in mind—we need to get above there. Ultimately, I think you have a scenario where traders will continue to be more “buy the dip” going forward. But again, if we lose $4,000, gold really starts to suffer.
The market had gotten so parabolic and out of control—not only gold but also silver, which surged aggressively to the upside—so you know you have a bit of a bubble. The question is, where do we go from here? I think we’re in a $200 range, and the longer we stay between $4,000 at the bottom and $4,200 on the top, the better it is for the market. It allows traders to take a breath, makes things less volatile, and lets those in the know start to push the market higher. If we give up $4,000, I think you’re going to see a controlled descent in this market.
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