• Gold fell pretty significantly during the trading session here on Monday, gapping lower, rallying to fill that gap, and then plunging toward the crucial $4,000 level.
• The $4,000 level of the course is a large, round, psychologically significant figure that a lot of people will be paying close attention to as it is an area where not only will there be a certain amount of market memory there, but I think there's probably a lot of interest in this via options traders.
• That, of course, causes a lot of noise. And I think it's interesting to see this market really start to accelerate to the downside. And I think if we break down below the $3,960 level, we will probably challenge the 50-day EMA next.
   

I Don’t Trust Rallies

At this point, I do not trust rallies. We know central banks are going to be cutting rates coming forward, and we do have three different meetings this week. I don't care. I think the market has already priced all that in. The market got too hot, and it desperately needs some type of pullback. If we were to break down below the 50-day EMA at the $3,857 level, then the bottom really falls out.
 

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Rallies at this point in time will almost certainly have to deal with a $4,200 level as a barrier. Anything above there then opens up the possibility of challenging the recent all-time highs at $4,400. But I think you've got a situation where the market is at best going to go sideways. And that really is the best-case scenario. We just got up here too quickly.

We could spend some time going sideways and working off some of the froth that's definitely within the realm of possibility, and it would be healthy, just as a pullback would be, so you need to be very cautious if you're buying gold at this point.

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