- Gold surged above $4,200 on Thursday but showed weakening momentum and notably soft volume, raising concerns about a potential failed return to recent highs.
- Price action appears vulnerable, with $4,000 and the 50-day EMA offering key support as traders weigh uncertain Federal Reserve rate-cut odds.
Gold has been very interesting during the session here on Thursday, as we broke above the $4200 level, and it really looked like we were going to take off. But as I've been saying over the last couple of days, there is a certain amount to be worried about when it comes to this market, as well as silver. Same idea, really.
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Recent Days Have Been Too Much
You saw the market just launch over the last couple of days, and eventually, momentum runs out. But what really has me somewhat concerned is the lack of volume in comparison to when we topped out. This is not a good look. This has the suspicion at least of a potential failed return to the highs. We'll have to wait and see. It's a little early to call a topping pattern, but this is about as classic as it gets.
At this point, you would have a clear stop loss if you decided to short gold. If the market were to break above the highs of the day on Thursday, clearly you would not want to get short anymore. That being said, I do think that even if we decide this is the top, it's not necessarily going to be a plunge straight down to oblivion. I think there is a massive amount of support just waiting to happen at $4,000 right along with the 50-day EMA.
There is a lot of concern about what will happen next, and it's worth noting that the Federal Reserve is about a 50-50 shot at cutting rates in December, which is not at all what people had been banking on. With that being the case, you have to look at this as a market that could get a little bit dicey. I certainly don't like chasing it the way we looked this morning and the way we've closed out the day. This is not a good look.
We'll just have to wait and see again. This is worth watching: a divergence and fall being so strong, and then this big push up higher really wasn't as strong. That suggests to me that we might be coming closer to the end and could see a reversal. Again, though, if we take out the high that we made during the day, that negates that at least for the time being.
This is a very dangerous market to trade in at the moment.
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