Gold markets have gapped higher to kick off the trading session on Thursday but then went back and forth as we continue to see a lot of noisy behavior. The $1920 level has been broken significantly, and now it looks like we are trying to work off some of the excesses. At this point, the market is likely to see a lot of volatility, but it is more likely than not going to be a situation where every time we pull back, the market will probably find plenty of buyers.
There are a whole host of reasons why gold is going higher right now, such as geopolitical concerns with Russia invading Ukraine. The concerns about inflation also have a major influence on the gold market, as it is a hedge against that. Looking at this chart, you can see that we have been very choppy and noisy, but have continued to grind to the upside for a while. The $1950 level above continues to be resistance, and I think in the short term that is going to be a little bit of a “buy on the dips” type of situation. Overall, gold will continue to go much higher, perhaps reaching towards the top of the massive spike from last week when Russia attacked.
Breaking above that level would of course open up the possibility of a move towards the $2000 level, which has a lot of psychological significance. The $2000 level should be a massive barrier to overcome, but if we continue to see a lot of the same issues hit the headlines, the market is likely to continue to favor gold in general.
Pullbacks all the way down to the $1880 level should be thought of as a potential value play, and as long as we can stay above there I do believe that gold has a significant chance of rallying at any moment. That being said, if we were to break down below the $1880 level, then we could go looking towards much lower levels, with the first area being the $1850 level. Having said that, it is very unlikely that we make that move unless, of course, we have a major change in geopolitics and perhaps even the Federal Reserve changing its monetary policy due to some type of new economic information.