Gold markets went back and forth Friday as we continue to see a lot of noisy behavior. Ultimately, this is a market that I think will see volatility, but we are getting close to bouncing from a major support level in the form of the $1700 level. The $1700 level has been important multiple times, so bouncing from there makes quite a bit of sense. Furthermore, it is an area that I think extends down to the $1680 level, so think of it more or less as a “zone.”

I do think that we’re probably about due for some type of bounce, but we need to see interest rates in America continue to roll over. If we do a rollover, then it’s likely that gold will benefit from this. I don’t know whether or not this is going to be a major bounce, but I think at the very least we are probably due for a little bit of an opportunity to the upside. The $1750 level is likely going to continue to be significantly resistant, and I think that signs of failure there would be a nice selling opportunity. This will be especially true if the yields in the bond market start to rise again.

If we get above there, then the $1800 level could be a large, round, psychologically significant figure, and an area where the uptrend line should come into the picture. Furthermore, the 50-day EMA is starting to reach that area as well, so all of those coming together in one spot do tell me that the $1800 level will be very difficult to recapture. That being said, it is $100 from here, so I think it’s probably very unlikely that we will see the market get there easily.

If we do break down below the $1700 level, we will more than likely drop to the $1500 level, assuming that we break through that $20 “zone of support” that I was talking about. Ultimately, the market is likely to see quite a bit of a flush lower, which would more than likely coincide with a huge spike in the value of the US dollar. It’s almost impossible to buy this market unless you can sit there and babysit the charts.

(Click on image to enlarge)

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