Gold has dropped a bit during the session on Tuesday, as we have now filled the gap from the open on Monday. This is a potential support level worth paying attention to.
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Gold has dropped a bit during the early part of the trading session on Tuesday to fill the gap from the Monday session, but ultimately, when you look at this market, it's likely that we continue to see the $4,000 level underneath offer some support. It's a large, round, psychologically significant figure, and it's an area that obviously attracts a lot of headlines. Gold has been somewhat choppy and noisy, but all things being equal, signs of exhaustion open up the possibility of selling again. The 50-day EMA is starting to drop, perhaps breaking down below the 200-day EMA, kicking off the so-called death cross. The death cross, of course, is a very negative technical analysis signal.
Death Cross Risks and the Short-Term Floor
That being said, it does tend to be late, so that's the one reason why I don't just trade this signal on its own. I think at this point we are probably going to continue to see a lot of back-and-forth choppy behavior with the $4,000 level being the floor, at least in the short term, and maybe the 200-day EMA being the ceiling. We'll just have to wait and see what happens next, as we are looking to try to build momentum.
The US dollar is continuing to work against the value of gold, and so do the higher interest rates, and the higher interest rates, of course, have a major negative influence on precious metals. That being said, I think this market remains more sideways in the short term while we try to figure out the bigger picture out there as far as the macroeconomic scenario. I do believe that eventually gold takes off, but not right now.
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