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Gold rallied early on Tuesday to show signs of support and life at a very familiar level. The momentum is most certainly to the upside during the early part of the session, but unfortunately, we have seen this before. So, with that, the question now becomes, will anything change? This is a major point of contention at this juncture, but truthfully, it seems a bit like the movie “Groundhog Day”, where the same thing kept happening repeatedly. It is almost like being stuck in a loop, as we simply cannot get enough clarity for larger moves in Gold to occur easily in this environment.
The broader context of this market has been one that has been testing the crucial $4,000 level multiple times, and so far, that area continues to bring in buyers. That being said, we haven't exactly seen an explosive upward trend recently, and therefore, it looks like a market that's just middling around just above a major figure. The behavior isn't exactly overly bullish, but it is enough to at least make you think that the area is one that will be important. This has been very stubborn support, so at least that is something that the bulls can hang onto.
Why the Death Cross and Macro Backdrop Still Matter
The support extends down to the $3,900 level, and if the market were to break down below there, then you could see a change in attitude where things get substantially negative. For what it is worth, the 50-day EMA broke below the 200-day EMA a couple of sessions back, and that, of course, kicks off the so-called death cross, a scenario that technical traders look at as negative. That being said, I also often see it as being “incredibly late” when it comes to stating the obvious.
Gold Price Chart
Alternative Scenario: Gold Stabilizes if External Pressure Starts to Ease
That being said, there are a lot of things that could change the attitude on the market in general. The downward pressure is something that remained mainly due to a reasonably strong US dollar and rising rates in America, but the alternative scenario could be something along the lines of some type of progress being made in the Middle East. Granted, that seems like a long way away, but there have been several twists and turns in the story of the Middle East recently, so that's always a problem for traders to try to decipher. This is an ongoing factor, and one that isn’t exactly stable, and I cannot imagine that will change as things stand right now.
What Gold Price Action Is Suggesting Near $4,000
Ultimately, this is a market that is trying to do everything it can to find its bottom, and while it certainly looks like it has so far, there's also a lot of downward pressure and a lot of things externally that could keep the US dollar and interest rates very attractive, taking away from Gold's luster. This is a market that is non-yielding, so the rules here are a little bit different than they are in other assets.
What Gold Traders May Watch Next Around $4,000
As things stand right now, though, it certainly looks like there are enough buyers in this general vicinity to at least make it a bit of a fight. This is probably how the market will behave until we get some kind of certainty. The gold market continues to favor short-term trading more than anything else at this point, but sooner or later, we will have to make a bigger decision and decide the longer-term direction.
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