The gold market gapped lower to kick off the trading session on Thursday, and then turned around to break down quite significantly.

After doing so, we are well below the 200 day EMA and perhaps just as importantly, the downtrend line. We have not bothered to fill the gap, and I do not know how long is going to take to turn around and get there. While this is a relatively negative candlestick, one would think that sooner or later people would try to fill the gap.

Nonetheless, I have no interest in trying to pick this thing up and therefore I am not interested in buying. Quite frankly, we would need to recapture the $1850 level in order to get long, and even then, I would be very cautious about doing so. Gold is getting slammed by not only the strengthened US dollar, but also  interest rates in America as traders continue to throw money at the bond market. At this point, I think it comes down to waiting for some type of stability if you are bullish of gold longer term.

If we break down below the bottom of the candlestick, then it is likely that we could test the $1750 level, and then eventually the double bottom that formed just below the $1700 level. If that gives way, it is probably going to be lights out for gold for a long time.

I have a couple of clients that buy physical gold asking me what to do at this point, and I think that even if the trade is to start buying again, you have all kinds of time to get involved. You do not necessarily want to be the first person to turn the market around, rather you would let somebody else take the risk and simply follow. That is essentially what I am waiting to see, some sign that other people jumping in.

While we did bounce slightly towards the end of the session, the reality is that we did not bounced enough to convince me that it is worth risking any money on to the upside. If we break down below the $1750 level, then I think the shorts are really going to press his thing lower, perhaps breaking it down completely. With this, the most likely move  is to simply sit there and watch.

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