- The gold market initially tried to rally a bit during the trading session on Friday, only to implode.
- At this point, the gold market looks as if it is going to test the crucial $3000 region, which is a large, round, psychologically significant figure, and an area where we had seen previous support.
- The 50 Day EMA is racing toward that area, but it hasn’t quite hit it.
Forced Liquidation
I suspect that what we are seeing here isn’t necessarily the people who are running away from gold, but rather people who were heavily levered in the markets were forced to sell their gold positions to cover the massive losses that they have everywhere else. In other words, I think this will end up being a buying opportunity given enough time, but we have not seen a bit of a bounce to get excited about. Ultimately, this is exactly what I think will happen, and it is something that I did during the day on Thursday but got flat on this market ahead of the Non-Farm Payroll announcement, which is something that I suggest for most traders.
At this point in time, we still have to keep in mind that there is a bullish flag that suggests the target is the $3300 level, but that doesn’t necessarily mean that it has to happen easily or quickly. It might be a situation where it takes 6 months, you just never know. That being said, if we were to turn around a breakdown below the $2900 level, it could be the end of the uptrend, or at least a very negative sign for the short term. While I like gold, I also recognize that the markets are far too volatile to be getting huge positions anytime soon, despite the fact that I am very bullish of gold for the longer term. After all, Friday has shown us that you could see a $100 loss rather quickly, which magnified by the effects of leverage can be disastrous.
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