Gold gapped lower at the open on Wednesday, as we see a lot of interest rate pressures on the gold market in general.
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Gold markets have gapped lower to show signs of weakness, and therefore, I think we've got a scenario where the market is really dropping to test the $4,000 level. The $4,000 level of the course is a large, round, psychologically significant figure, and it attracts a lot of headlines. It's probably worth noting that the price action previously had suggested that maybe there is support down to the $3,900 level.
So as long as we stay above $3,900, there is still a chance of a bounce. Breaking down below that level opens up a move down to the $3,500 level, which on longer-term charts was previously resistance.
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Interest Rates and Geopolitical Noise
It is worth noting that the 50-day EMA is getting ready to break down below the 200-day EMA, and that suggests to me that longer-term traders might be getting bearish as well. With interest rates jumping in the United States, and they have jumped quite nicely during the day, that works against the value of gold in general. As long as rates remain strong, and of course, this was in reaction to the United States hitting the Iranians militarily, gold's going to struggle. That's not to say I don't like gold. I love gold, actually, from a longer-term standpoint, but we have got to get through this Middle East noise. And until we get through there, I think gold continues to be something that you just don't trust.
Rising interest rates are the main problem, and that, of course, is a problem that just seems to continue. And with this, we may get an opportunity to buy gold really cheaply. But when you look at the longer-term move over the last couple of years, even dropping to $3,500 is hardly what I would call a washout of the trend. It's just a healthy pullback from a market that was previously parabolic.
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