Pay attention to the 10-year note, because if the yields in that market continue to go parabolic, that will eventually wear on gold, as well as just about anything else out there.
Gold markets fell rather hard on Friday to reach the 50-day EMA. The 50-day EMA is an indicator that a lot of people pay close attention to, and it is interesting to see how we react to it. If we break down below the 50-day EMA, then the market could go looking to reach the $1900 level. The $1900 level is a major round figure and an area where we have seen buyers previously.
On the other hand, if we turn around and rally, we probably need to break above the $1950 level to suggest that it is time to start thinking about buying again. Longer term, gold should do fairly well as long as the interest rates in America do not spike quite drastically. Ultimately, the market is trying to figure out what we have ahead of us, because right now the market is having to wrestle with the idea of the Federal Reserve tightening monetary policy, and what that is going to do for the markets overall.
As inflation continues to rip higher, people will start to look at the possibility of gold rallying as a bit of a buffer for it. That being said, the market needs to stay above that $1900 level to remain bullish as far as I can see. If we were to break down below there, then the market more likely than not will go looking to the 200-day EMA. The 200-day EMA currently sits at the $1850 area, so it is worth paying close attention to.
On the upside, the $2000 level is where we had pulled back from, and you can see there is a perfect shooting star in that area, so it certainly makes sense that we would see that as a potential target if we can continue to see upward pressure. However, we have just broken through the bottom of a couple of hammers, and that is not a good look. While we are not necessarily getting a sell signal quite yet, it certainly is not a good sign. Pay attention to the 10-year note, because if the yields in that market continue to go parabolic, that will eventually wear on gold, as well as just about anything else out there.