The gold market finds itself testing the 4,000 euro level on Wednesday, which is bound to attract headlines.
Gold (EUR)
The gold market finds itself testing the 4,000-euro level, an area that obviously is a large, round, psychologically significant figure that a lot of European traders will be watching closely.
This area has been challenged a couple of times in the early part of May and now looks very much like a market that is trying to determine whether or not it can continue to go higher. When I look at the longer-term charts, I could make a real argument for a zone of resistance between 4,000 euros and 4,100 euros.
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Because of this, gold may find a bit of trouble here, but ultimately, this is a market that continues to watch a lot of different things at the same time, not the least of which would be the US dollar and the Federal Reserve interest rate policy.
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After all, on Friday we get a speech by Kevin Warsh, the Chairman of the Federal Reserve, and if he sounds dovish, you could see gold get a bit of a boost not only in dollar terms, but multiple other currencies like the euro and maybe even the Canadian dollar, Australian dollar, etc.
The European Central Bank is expected to raise rates by 25 basis points in September. That is probably already built into the price. The question at this point is whether or not the Europeans sound hawkish or dovish heading into the press conference on that meeting. This could be a major inflection point.
And when you look at the price action over the last 6 or 8 months, this is a level that's been important multiple times. It is because of this that I am watching this market very closely. Pullbacks will, more likely than not, end up finding traders that are interested in gold, because quite frankly, debt is a major problem not only in the United States and Japan, but also in Europe.
The Golden Cross just occurred when the 50-day EMA breaks above the 200-day EMA, so apart from the resistance zone, the chart actually looks pretty bullish.
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