By FXEmpire.com
The gold markets attempted a rally on the session for Thursday, but as the Dollar gained in later hours, the gold markets wilted. The failure of a rally and the subsequent shooting star that formed for the Thursday session just proves how weak the gold markets are at the moment. As we look at this chart, it looks as if there isn’t much of a trade at the moment. We still have the $1,500 and $1,600 levels as triggers, and think the action in between will continue to be difficult at best to trade.
The breaking below of the $1,500 level on a daily close has us selling aggressively as it would show a real chance in momentum. Not only would the bullish action be gone, but a major support level would have been violated. Certainly a large round number like $1,500 should by all means be a reason for support to come into play. If it didn’t – this would be a very bearish sign indeed.
Most of the action in this market truly has very little to do with gold truth be known. This is more of a reflection of the Dollar strength that we are seeing around the currency markets. As a general rule, if the Euro falls against the Dollar, this market falls. This is exactly what has been going on for some time now, and the situation in Europe doesn’t look anywhere near being fixed – so let’s be honest here: the Dollar should continue to grind higher in value for the foreseeable future.
Looking forward, there could be a divergence between the Dollar and gold, but at the moment there is simply far too much fear in the markets to think that the demand for gold will be strong. This market can be a fear based safety trade, but not when it is based out of everywhere but the United States. As long as there is doubt that the Fed will ease, there is a drag on this market as well. Because of this, we are waiting for our big levels to tell us which way to trade, with buying above the $1,600 level and selling below $1,500.
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Originally posted here
