On Wednesday, the gold market showed little movement and remained near the 38.2% Fibonacci level, a level that has provided some support in recent days. This area was previously a resistance level, so there is some market memory at play. The gold market is currently situated between the 50-day and 200-day exponential moving average (EMA) indicators, which can create some pressure.
If the market breaks above the 50-day EMA, it may resume its uptrend. However, caution is advised as the $1900 level has been a significant area of selling pressure in the past. Multiple inverted hammers were formed in this area, and we also saw a drastic sell-off before their formation. If gold does start to rise, it may be a slow and painful process.
On the other hand, if the market breaks below the bottom of the hammer from last Friday, it could drop to the 200-day EMA at around the $1800 level. This level is significant both psychologically and technically.
The Federal Market Open Committee Meeting Minutes will be released later in the day, which will impact people's bets on the next moves of the Federal Reserve. This will have an effect on gold, the US dollar, and interest rates. Due to this, there may be minimal activity in the market until the outcome of the meeting is determined, followed by high volatility.
Overall, the long-term trend for gold is still upwards, making it a "buy on the dips" situation. That being said, position sizing will be crucial, and therefore you need to make sure that you don’t get overly exposed. You should also pay attention to interest rates and the US dollar, as there is a negative correlation between the greenback and gold over the longer term.
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite.
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