There is a study by McKinsey that shows commodities spent the vast majority of their time in mean-reverting or range-bound states. It claims that commodities tend to trend about 20 to 30% of the time and trade sideways about 70 to 80%.

Studies by organizations like the World Gold Council show that gold’s volatility isn’t evenly distributed. It often enters “sleep” cycles where it moves sideways for years, followed by “vertical” cycles.

Last year, gold outperformed the S&P 500 significantly during months of high geopolitical stress, while moving sideways during risk-on periods. This year, it broke out of the long-term consolidation phase. That may have been the 30% trending phase. So brace yourself because we may be in the consolidation phase, but that doesn’t mean it’s untradeable.

Since the spike bottom on March 23 established support at $4,099.12 on the 200-day MA, I think that sends a signal that this indicator is support. Since it was rejected by the 50-day MA at $4,891.54 on April 17, we can say that it is resistance.

The price action this week shows it can still find support inside the moving averages. The current two-day rally may be telling us that we are in buy-the-dip mode. The recent reaction to the 50-day MA certainly told us that traders are selling rallies.

Once again, the market is giving you two choices: be active and take out offers, hoping for the breakout, or be passive and wait for the dip into value areas. I understand that traders like the “set it and forget it” trade, but that’s not happening now.

What I’m Watching

The way I see it, gold is still in sell-the-rally mode. Support is holding but buyers are not committing at these levels. The 10-Year U.S. Treasury yield and Fed rate expectations are the two levers that will decide this. Until one of them breaks in gold’s favor, this market grinds lower or goes nowhere. That is where we are.

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