By FXEmpire.com

The gold market fell during the Friday session as the Dollar continues to gain in value. The gold markets are reeling from the pessimistic attitude of the markets, and the Dollar looks set to continue to gain. The fear trade continues to be one of the biggest drivers of the markets, and with the announcement of troubles at JP Morgan in the trading division, many traders simply sold risk first and asked questions later.

The gold markets can be a risk barometer at times, and the fact that we are selling off is a result of the concerns in Europe. The European Union has multiple issues at the moment, and the debt crisis isn’t exactly over as well. The markets continue to be a possible minefield, so gold markets will continue to find trouble as long as the headline risks are out there. The market will reflect this in our opinion.

The markets will continue to hang on the words of various European leaders that you probably aren’t even aware of, and as such, buying gold will be very difficult. The very fact that there is so much uncertainty out there will continue to give a lift to the Dollar. With the Dollar continuing to strengthen, we should continue to see weakness in the gold markets.

The $1,500 level is the absolute line in the sand for us, but it must be said that the $1,600 level being broken is a very ominous sign. The pressure seems to be mounting in this market, and as long as problems remain, we are very uncomfortable buying gold. The market has a long history of being very volatile and making massive moves on news, and as a result is very dangerous at times. We feel that this is market will have to “prove itself” in the meantime in order for us to be long of it. We can’t sell either, as the $1,500 level below still looks to be very supportive.

On a daily close above the $1,640 level, we would be willing to go long again. Until then, we are going to be very cautious about being in the gold markets. If we get a daily close sub-$1,500 in this market, we are ready to sell.

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Originally posted here