• Gold markets have pulled back a bit from the previous trading, as we had broken out of a rising wedge.
• At this point, traders are looking a bit cautious when it comes to gold, mainly because the US dollar is rising.
• This is not to say that gold is suddenly going to go plunging lower, but I do think that a pullback makes quite a bit of sense as liquidity will become an issue in the holiday season.

The 200-Day EMA sits just above the $1760 level and will come into the picture to offer support if we get that low. I would anticipate some type of bounce in the general vicinity, but right now I think this is a situation where we are probably going to see more of a general malaise than anything else. After all, most big traders around the world are already done for the year, because the last thing you want to do is hinder your performance heading into the calendar change.
 

Negativity Ahead

On the upside, we have the $1800 level in the spot market acting as significant resistance, but even then, I would say that we have a little bit further to go before we have truly “broken out.” I would like to see the market break above the $1820 level to clear all that noise out of the way, allowing gold to rise toward the $1875 level down the road.

One of the questions we must answer right now is whether this is an interest rate play, or if it a simple wealth preservation play. It appears that markets are focusing lastly on interest rates and more on recession, and if that’s going to be the case it’s likely that the gold market may be very noisy as a result. The noisy behavior will almost certainly cause quite a bit of anxiety, but most of the big money is out of the market right now, simply waiting until January to go back to work. Keep in mind that a lot of the biggest movers of the markets are trading other people’s money, meaning that they want to see the end of the year smoothly because that’s when they report their yearly gains or losses. I suspect that we are probably going to see a bit of negativity, but I’m not calling for anything major.

(Click on image to enlarge)

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