The gold markets fell pretty significantly during the trading session on Friday as we continue to see a lot of noisy behavior and a bit of hesitation to go forward. As we are closing towards the bottom of the range, it is very likely that we are going to find buyers underneath, perhaps at the $1850 level (GLD). That is an area that also is going to be featuring the 50-day EMA rather soon, so I think that is yet another reason to think that there is a little bit of a floor in the market underneath.

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Beyond that, the downtrend line also sits just below there, and the 200-day EMA is starting to rise as well. Speaking of the 200-day EMA, we have recently made a “golden cross” in this market, which is a longer-term “buy-and-hold signal.” That being said, I do not necessarily think that we will break down, but if we were to slice through all that, then it would obviously be a very negative sign.

To the upside, if we can break above the highs of the last couple of weeks, that is very likely that gold will go looking towards the $1950 level. That opens up a move to the $2100 level, but I think that the $1950 level will continue to see significant selling pressure, so it will take quite a bit of effort to get above there. Having said that, once we get above there, then I think we will spring to life and really take off to the upside. This is a market that does tend to make very sudden moves, so the fact that we are grinding away in an area that has the attention of so many traders tells me that we probably are going to have a bigger move sooner rather than later.

As people look at inflation, they do anticipate that gold should go higher, but it probably needs a little bit of help from a falling US dollar as an example. Regardless, I do not have any interest in trying to short this market in the short term, as I think we probably have more consolidation ahead of us than anything else, especially after breaking above an obvious downtrend line that would have people questioning where we are going next.