- Gold spiked during Asian trading on Tuesday to break slightly above the $3,500 level but has since gotten absolutely crushed.
- It looks like we could end up forming a bit of a shooting star for the day. We'll just have to wait and see.
- But this does make a lot of sense due to the fact that we are overbought in any scenario, that you can think of as far as from a technical standpoint.
Granted, part of this is due to the US dollar selling off, but if you look at several currency pairs around the world, British pound against the US dollar, maybe the Euro against the US dollar, the Australian dollar against the US dollar, et cetera, the US dollar is fighting back a bit, and I think at this point in time we are going to see a pullback in the gold market as a result. This doesn't mean that the trend is over and quite frankly I think the smart trade is to look for some type of value on this pullback. I would love to see a pullback to the $3200 level but we'll just have to wait and see because quite frankly that would be about 10 % pullback, that would be pretty extreme, but I suppose it's possible.
Another Level to Watch
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We may have to settle for the $3,300 level. We'll just have to wait and find out. On the other hand, though, if we were to break higher and clear above the top of the candlestick for the trading session on a daily close, that would be an extraordinarily bullish sign and it could send gold looking for as high as $3,800 an ounce.
I don't like that trade because gold markets have been so ridiculously strong to begin with. While it does make sense for the uptrend to continue, it also makes sense for people to take a bit of a breather or perhaps collect some of those massive profits that they've already been in. Fundamentally speaking, I don't know that anything has changed. I think we're just exhausting some of the momentum.
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