Gold has had great week. So is this the start of a sustained move higher, or just simple short-covering? You'll have to watch Friday's close to find out.
Gold traded to a low of $1,352.10 on Thursday night after stalling out and failing to make new session highs against $1,375.40 in Thursday's session. The level just below there, $1,374.30, has served as resistance a few times over, and now there is a major trend line meeting the market at that level.
This adds to the headwinds, and helps explain why the market kept stalling out around $1,375 on Thursday.
But it wasn't for lack of trying—gold twice made a run at the highs. Gold reached $1,375.30 the first time, and the second attempt was right ahead of the floor close. When the market caught resistance at the same level, it began to show signs of failure, sending gold into the mid-$1,360s.
(Read more: Gold recovery? Here's one way to play it)
Gold was able to hold support at $1,362.80 on Thursday and Thursday night. But on Friday morning, it chewed through that level, and ran stops below Thursday's low of $1,358.50.
In the broader scheme of things, gold is still trading significantly above where it started the week, thanks to the Federal Reserve's surprise decision to maintain the pace of asset purchases. But in my view, this just prolongs the inevitable.
The can has officially been kicked down the road once again, and whether the Fed plans to taper the bond purchasing program in December or in the first quarter of next year, it will have to taper at some point.
(Read more: Why Bernanke may have ended gold's bear market)
Gold's failure to follow through is beginning to make Wednesday's rally look like a big short cover. Friday's close will help give us a clearer picture, as a retest and close below $1,350 to $1,352 will confirm a failure.
We will be looking to sell the first test of $1,362.80, which is just above Thursday night's small consolidation. However, a close above this level will likely send this market into a larger consolidation higher. And it will take a close above $1,379.60, or a move above $1,383 to $1,384, to signal a bullish leg forward for this market.
—Rich Ilczyszyn is founder and CEO of iiTrader. Follow him on Twitter @iiTrader.
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