By FXEmpire.com
The gold markets rose during the Tuesday session as the fear of a European meltdown has reentered the markets. The gold markets got a bid based upon a flight to safety, as this market rose as the Dollar did as well.
The market has been in a downtrend channel for the last 5 weeks or so, and the market stopped just as the price got to the top of that channel. The 200 day EMA is also in the area as well, and acted as resistance. The market looks as if it is currently trying to find a range between $1,600 and $1,700 an ounce. The current action does suggest a fairly obvious sign though, as the top of the channel giving way would be a sign of strength in this market.
However, the top of this channel could be a resistance point that the market struggles against, and if that is the case we could see the market continue to grind lower in this predefined range. The slide would certainly try to reach the $1,600 level as well, and we could see a real fight at that point. The market will also find massive support at the $1,500 level is that gives too. At that point in time, the market would be in a massive correction that could last for a long time.
The selloff in this market has been brutal, but the conditions around the world and more specifically Europe, has the investing world on edge. The Spanish and Italian bonds are now spiking in the rate of return, and because of this a lot of investors are starting to become concerned about the future of debt markets. When the damn brakes, there would almost have to be a move to the Dollar in general.
The gold markets will continue to be volatile as the market works out the problems in Europe. However, there will be some kind of run to safety if things get worse. If you have the ability to trade gold in Euros, by far this will be a better trade than the US and Dollar-based gold markets. Otherwise, a break above the top of the channel will suffice as a buy signal – but understand that trades are going to be of the short-term nature.
Gold Forecast April 11, 2012, Technical Analysis
Originally posted here
