Gold markets have broken down significantly during the course of the trading session on Monday as the market looks to reach down towards the $1700 level.
Gold looks horrible again, as traders have stepped in and really pushed to the downside. The $1700 level is an area that should continue to attract a certain amount of attention due to the fact that the area had previously been massive resistance, and of course it is a large, round, psychologically significant figure.
Most recently, we had dipped below there but then turned around to show signs of strength again, so if we were to break down below that lower low, then the market is likely to continue reach towards the next major support level that I see, which is closer to the $1500 level. Do not get me wrong, I do not think that the market suddenly races to the $1500 level but would get there eventually.
The US dollar has its say when it comes to gold as well, so if it starts to strengthen that could work against it but it is worth noting that yields are a major player in that game. If yields rise in America, that will more than likely work against the value of gold and therefore the last thing you want to see is yields in the 10 year note started to rise again as it is toxic for the metals market.
After this candle has formed for the trading session on Monday, I am much less interested in buying gold and believe that the downtrend will more than likely continue given enough time. With that being the case, I think that we are looking at a scenario where the market is going to be very difficult to get bullish about without some type of major shift in attitude.