Volatility is expected to be a dominant theme in the gold market, urging market participants to maintain reasonable position sizes. 

• The gold market experienced a rollercoaster ride during Thursday's trading session, reflecting the unpredictability caused by a surprising surge in the Consumer Price Index (CPI).
• Although gold initially rallied, it quickly relinquished those gains, raising concerns about its future performance as interest rates continue to climb.

The $1900 level stands as a significant psychological milestone, but it also marks an area of previous market activity. Market memory often plays a pivotal role around such price levels, and early signs suggest that this phenomenon is already influencing gold's trajectory.

Beneath the current levels, the $1850 mark provides a potential support zone, followed by the $1800 level. These two levels are likely to garner significant attention from traders and investors in the coming sessions. Additionally, the emergence of the "death cross" is beginning to make its presence felt. This technical pattern occurs when the 50-day Exponential Moving Average (EMA) crosses below the 200-day EMA, traditionally signaling a bearish sentiment for the long term.

To gauge the future direction of gold, it's imperative to closely monitor the developments in the US bond markets, particularly the yields stemming from the 10-year treasury bonds. The 10-year yield and the short-term yield curve remain pivotal factors influencing various markets, and gold is no exception. A reversal and breach above the moving averages could potentially propel gold higher, possibly targeting the $1950 level and eventually the psychological milestone of $2000. However, such an outcome seems unlikely, given the recent price action witnessed on Thursday.

Volatility Ahead

Volatility is expected to be a dominant theme in the gold market, urging market participants to maintain reasonable position sizes. This strategy seems prudent not only for gold but also for most markets currently navigating through uncertainty. Gold, known for its inherent volatility, may exhibit even greater swings during this period.

In summary, while gold's immediate future remains uncertain, an intermediate-term bearish bias appears to be the prevailing sentiment. Nevertheless, the precious metal's allure and safe-haven status could reemerge in the long run, ushering in a brighter outlook. Until then, brace for a volatile ride as market dynamics continue to evolve.

Potential Signal: I am selling gold now. I will be aiming for $1840, with a stop loss of $1890. Keep in mind that you need to pay attention to bond yields as well, so if they fall back down, I will cut a portion of the position.

(Click on image to enlarge)

More By This Author: