The gold market continues to be one that a lot of people will be watching closely. The brutal selloff on Friday caught a lot of people off guard, and now the entire world seems to be watching closely.
Gold
The gold market has plunged during the trading session here on Monday to reach all the way down to roughly $4,430 before turning around and bouncing. At one point, it looked like we were going to turn things around completely, but as the Americans have come on board and more importantly, the futures market got its full volume, we are starting to see a little bit of negativity creep back into the market.
We have rolled over since the open outcry beginning of the session. I think at this point in time you still have to be very cautious with this market. Does gold go higher over the longer term? Probably, but that also could be after a massive pullback, as there are a lot of wiped out account out there right now.
The gold market just got so far ahead of itself that I think a lot of people had to be wiped out. I know that margin has been raised in the various precious metals markets around the world and that in and of itself can hurt people as well because it influences things like the cost of carry.
Central banks around the world continue to buy gold. That is why I do think eventually it rallies, and I do not necessarily want to short this market, but it is time to get out of the way of this avalanche. Candlesticks like these do not appear out of nowhere like the one we saw on Friday. That is something breaking in the system. Now we have to figure out exactly what that is. I suspect the selling pressure isn’t over.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
