Technical Analysis: Another Very Big Day For Gold!

| June 19, 2013 | 0 Comments

goldThis is a huge day for the price of gold.

The yellow metal is on the verge of testing an extremely important technical support level at $1,350 today.  And believe it or not, there’s also an important economic announcement this afternoon that will go a long way towards deciding gold’s long-term fate.

I’ll talk more about that in a minute. 

First, let’s look at a chart…


As you can see, $1,350 is the closing low from April 15th.   Since the April meltdown, gold bulls have tried pushing the metal higher.   But attempts at reigniting gold’s investment luster have thus far proved futile. 

Those failures now have the once highly revered commodity sitting on the edge of a cliff. 

If $1,350 is broken, there’s only minor support at $1,322, the intraday low set on April 15th.  And if that line is crossed, it could get rough for gold investors.

And listen to this…

The Federal Reserve announces their decision on short-term interest rates later today. 

While no one is expecting the Fed to hike rates, there’s a lot of buzz surrounding the idea that they may start “tapering” their quantitative easing (QE) program.

As you may know, years of QE have led to high inflation expectations amongst investors.  Many feared the Fed’s massive money printing program would end in a hyper-inflationary disaster.  These worries are precisely what led to the massive influx of capital into gold and other inflation hedging assets in the first place.

But now it appears the hyper-inflationary scenario may be avoided all together.  In fact, government inflation numbers are still tame, coming in at 1.7% in May.  Of course, there’s plenty of distrust around the government’s inflation reading- something we’ve talked about before.

But the fact is, markets move off official numbers… 

And right now, official numbers tell us inflation isn’t a problem.

It’s quite a coincidence that the test of such an important technical level in the gold market and one of the most important economic announcements of the year are happening on the same day.

Without question, gold investors will be listening to Ben Bernanke very carefully this afternoon.  If there’s any sign that the Fed Chairman is ready to pare back bond purchases, we could see another massive drop for the yellow metal.

On the other hand, if Bernanke pushes the idea that more stimulus is needed to push unemployment levels lower, we may see a surprise rally.

Either way, today is a very important day for gold…

Until Next Time,

Justin Bennett

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Category: Gold, Precious Metals, Technical Analysis

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.