By FXEmpire.com
Gold markets had an outside bearish candle for the Tuesday session as the market continues to sell off in general. The recent action in the gold futures has been horrible, and it looks as if we are trying to form a triangle as well now. The gold markets have massive support at the $1,500 level, so getting through there would indeed be a big accomplishment by the sellers.
It is in that vein that we look at the current situation. The US dollar has been gaining against most currencies as of late, and the situation in Europe has a lot of funds liquidating their highly leveraged gold positions. This causes the drift lower that we see currently. However, there are some very fundamental questions that we need to ask as well. The inflation picture in most countries is quite low, and this tends to work against the value of gold over time.
The European crisis has forced money into the US dollar, and while both can go up at the same time, it is often difficult for gold to gain while the Dollar is so heavily favored. The fact is that a more valuable Dollar stretches farther when buying things, and gold is certainly included in that equation. As long as the situation remains the same in the European Union, there is little that we see working for gold prices, and a lot working against them.
However, as stated previously, the $1,500 level should be massive support. Because of this we have to be careful about selling gold now. The $1,600 level above is resistance, and this could contain prices for the near term. However, it does look as if the triangle is trying to tell us something. (It should be noted that the triangle is symmetrical.) The market sets up as a fairly straight forward set of signals now as the two levels are containing price so nicely. On a break below and daily close below the $1,500 level, we are selling this market. On a daily close above the $1,600 level we are buying. Until then, expect plenty of choppiness in this market.
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Originally posted here
