Massive Reversal After Inflation Numbers

I would be cautious about my position size, but I certainly only have one direction in mind.

The gold market had initially fallen on Friday and then fell even quicker once the inflation numbers came out much hotter than anticipated. However, the bond market reversed as people started to buy bonds in fear of a recession, and in a bit of a knock-on effect, this market has skyrocketed to pierce the 50-day EMA.

Looking at this chart, if we continue to go higher from here, we will more than likely attack the $1900 level. If we can break above the $1900 level, then it’s likely that we could see the gold market looking to the $2000 level. In general, I do like gold for the longer term, and after the action that we had seen during the day on Friday, it does suggest that there are plenty of buyers out there. I think now you can look at this as a “buy on the dips” type of scenario unless we see a significant shot higher in interest rates.

If we were to turn around, you have to believe that there is a significant amount of support at the $1835 level. Furthermore, you probably have support at the $1825 level as well. In other words, this is a market that will continue to be noisy, but it certainly looks as if people are willing to get involved and start getting long on any type of value that is offered. Ultimately, I do think that we eventually find the $2000 level, as the old correlation between inflation and gold reemerged during the Friday session.

I would be cautious about my position size, but I certainly only have one direction in mind. The Friday session changed almost everything, and now it’s simply a matter of trying to find some type of value. I don’t know that I would jump into this market right away, but if we get an opportunity to take advantage of value, then that’s what you should be doing. The 200-day EMA is flat and slicing through the candlestick for the day, so it shows that we are going to continue to see a lot of consolidation, and if we were to get the second impulsive candlestick, that will change the entire complexity of the market.