The gold market edged higher on the back of a bounce off its 200-day moving average. As we delved deeper into the charts, it became clear that a potential bullish recovery was imminent, arguably we could see a reverse "double bottom" emerge.
The 200-day moving average has widespread importance as a pivotal trend indicator. However, at this time, it is in harmony with the previous support level. From this situation, it is clear that the market will continue to see a lot of volatility. However, the crux of the matter will revolve around the direction and potential development of the dollar during the Jackson Hole seminar. Clearly, this market is still subject to central bank interest rate policy inquiries.
So it will be interesting to see how this factor affects the gold market. It's no secret that rising interest rates can spell trouble for gold, but signs of lower rates will undoubtedly push prices higher. Meanwhile, there is an inverse relationship with the greenback, with upcoming speeches from Christine Lagarde and Jerome Powell on Friday sure to cause major volatility in the sector.
As long as we can stay above $1900, we would not consider shorting this market. Therefore, we tend to expect the path to the $2000 level to be a possible top. After all, this move feels more like a cohesion than anything else, and it doesn't take much to achieve it. However, if the market breaks below the $1900 level, it could pave the way towards the $1800 level.
Finally, the gold market rebounded sharply on Tuesday, based on the momentum generated by the rebound of the 200-day moving average. Our prediction is that this market has the potential to go higher, although how fast it will go remains uncertain. A closer inspection of the charts shows that recovery potential is on the horizon, which echoes the concept of a "double bottom."
The importance of the 200-day moving average as a trend indicator matches well with previous support levels, adding to a slightly volatile market environment. The way forward depends on the direction of the dollar and upcoming developments at the Jackson Hole seminar. This market is inherently intertwined with central bank interest rate policy, making it a dynamic to watch. It is worth noting that higher interest rates can restrain gold, while lower interest rates can push up gold prices.
The negative correlation with the dollar adds to the complexity, with upcoming speeches from Lagarde and Powell expected to spark wild swings. As long as we stay above the $1900 level, the short case is not attractive, with the $2000 level expected. Inclusion is best represented by this shift, and it's not a difficult task. However, a break below the $1,900 level could pave the way towards the $1,800 level.
