The gold markets had a fairly benign looking week over the last five sessions as the markets continue to try and sort out what is going on in Europe. The rush to the Dollar will have been the biggest hindrance to the value of gold, and as such this market has been very volatile, but going nowhere in the end.
The problems in Europe continue to push money into the United States, and as such the Dollar will naturally be working against gold prices. However, it must be noted that the support just above the $1,500 level looks fairly strong so far. In fact, we measure this market by that level as far as trend. If we are above it, then we think this market is a long-only one, (when you are involved that is) and if we are below that level, this market is a sell-only one. The level is that important to the direction of gold as far as we can see.
The debt crisis in Europe is far from over, but the strong rally here and there can still happen and as a result, we can see this market go much higher suddenly. Certainly, the market has been volatile in general, and a massive move of $50 a day can certainly appear from time to time. This market isn’t one of our favorites at the moment as there are simply far too many risks in trading it. However, if we are to be forced to pick a direction, it would be to buy close to the $1,540 level.
The gold market is essentially stuck in a $100 range between the $1,540 and $1,640 with the “ultimate bottom” being at the $1,500 level. The long-term prospects for gold are pretty good, but with the “risk on, risk off” attitudes of the markets, we are going to have to give the market a wide birth before taking on a new position. The risks are far too great for us to trade any differently. As such, we buy above the $1, 640 level and sell below the $1,500 level.