The gold markets originally fell for the Friday session, but as per usual, the Americans stepped in once on their own to push all risk related assets up. The Friday session often features a lot of short covering, and this could be the case during this session. With the weekend coming up, there are a lot of traders that simply won’t hold over the weekend, and thus Friday almost always sees some kind of reversal in the waning hours of the week.
The real question of course is whether or not this move will continue. After all, the candle for the session looks very promising, and there is certainly some support in the area below. The market has been bearish overall lately, and at this point it might be a bit difficult to get overly excited about going long. The $1,640 level above was the original hurdle we mentioned a few sessions back for the bulls to overcome, and they didn’t. This is because the Dollar continues to be bought overall. As long as there is a big unwind of Dollar shorts, this market will continue to struggle.
The $1,500 level below is the “line in the sand” that we are paying attention to in order to determine a longer-term trade. If we manage to break below it and close down there, we would become bearish overall in this market, and start shorting aggressively. Until this happens, we cannot sell gold as it continues to bounce from time to time.
As for buying this market, there are a lot of signals that could suggest this. The supportive candle here and there and the surge above the aforementioned $1,640 level would serve us as buy signal. The gold market will continue to get pushed around by the headlines coming out of Europe, and the fact that we had this bounce on Friday has us wondering whether or not it is true, or short covering. With this in mind, we are keeping a wide range from which to place any trades. We still think this area that we are in is going to be choppy, and until we break above the $1,640 level, or below the $1,500 level – we are staying away.