Posted on June 17, 2013
Gold is exchanging hands at lower prices today in quiet dealings. Gold prices are likely to remain choppy and indecisive ahead of this week’s FOMC meeting announcement set to take place on Wednesday afternoon. The meeting announcement will be followed up by a Ben Bernanke press conference.
During this announcement, and the subsequent press conference, investors will be closely scrutinizing every remark made for indications on the future of the Fed’s quantitative easing program. It is widely expected that no changes to policy will be made at this meeting. The remarks made however, and the market’s interpretation to those remarks will likely drive price action not only in the bullion market but stocks, bonds, and currencies as well.
The great debate continues to rage on as to when the fed will begin to taper its operations and by how much. The answer to this question seemed much more clear a few short weeks ago. Since that time however, the Nikkei index has continued to see great volatility and much of the data stream here in the U.S. has been on the disappointing side. This has caused U.S. stock markets to sell off a bit. This should not however, be looked at as anything other than a minor correction-at least for now.
More confirmation would be needed to attempt to call a top in the stock market. Perhaps this week the market will once again tip its hand. Needless to say, there is a lot riding on if and when QE may begin to shrink. The Fed’s and chairman Bernanke’s comments this week could really get gold prices moving. Unfortunately no one knows which way. Gold has remained stubbornly tough in recent weeks throughout all kinds of selling pressure. The fact is the market has remained in a tight range, and thus far has thwarted multiple attempts by the bears to take prices lower again.
The pressure is clearly on gold bulls to attempt some type of rally, but for now the fact that price has not broken down further could be considered a mild victory for the bulls. We do continue to feel however, that price is not likely to continue to go sideways for much longer. It seems as if the market is simply waiting on a more definitive answer regarding ongoing QE operations before making its move. Should a rally ensure, we think that gold prices could likely test the original breakdown level of $1560ish. Should the bears win out, we feel a large leg down cannot be ruled out that could take prices to the $1150 area.