Gold Continues to Look for Momentum 

• Gold falls slightly during the Tuesday session. 

• The US Dollar gains despite yields falling in America. 

• Despite what most traders are taught, both markets can rally simultaneously. (see the 1980’s) 

Gold markets pulled back slightly during the trading session on Tuesday, as we continue to see a negative correlation to the US dollar. The US dollar has been very strong for a while, so it should not be a huge surprise to see that it still has a significant effect on what happens with not only gold but multiple other markets as well. 

This is despite the fact that treasury yields early in the session on Tuesday did start to fall. The market is still very bullish and from a longer-term perspective, could just simply be consolidating in order to build up enough momentum to continue the overall uptrend. Over the last several days, we have seen the $2350 level offer significant resistance, with the $2250 level underneath offering support. 

Technical Analysis 

The technical analysis for the gold market does remain bullish, despite the fact that it has been sideways for some time. The 20-day EMA has flattened out a bit, but the 50-day EMA sits just below the crucial $2250 level and is rising. The moving averages are spread out fairly well, suggesting that perhaps there is still plenty of momentum from a longer-term perspective. However, it will not be until the market breaks above the $2350 level that you could see a bit of momentum entering the market. Gold has been very momentum-driven until recently, so taking a breather makes a certain amount of sense. 

US Dollar Index 

The US Dollar Index saw a bit of strength during the trading session on Tuesday, despite the fact that the yields in America did drop. The US Dollar Index is challenging the 20-day EMA, near the 105.26 level. If the market reaches the consolidation area above, this could offer a little bit of technical resistance, and that could give a little bit of a bump to the gold market as far as momentum is concerned. 

However, it should also be noted that geopolitical concerns around the world still cause major issues, and this typically can favour not only gold but the US dollar. In other words, it is very much in the realm of possibility that we can see both of these markets rally at the same time, especially if there is a sudden run towards safety. Because of this, the negative correlation between the two markets can ebb and flow, and therefore traders will have to be on their toes when it comes to what is pushing both of these markets around. 

Ultimately, in the longer term, both look bullish, and it does suggest that it’s more about safety and geopolitics than anything else from the standpoint of longer-term traders. The markets could very well pay close attention to the earning season in the United States as well because that could have an influence coming from the bond markets. Regardless, the trends are formally ensconced in both of these markets and should be noted. 

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