Will Bernanke Pull Another Fast One On The Markets Today?

| July 17, 2013 | 0 Comments

oil-gold-silverBen Bernanke goes before Congress today for his annual testimony on the US economy.  

Of course, investors will be examining every word, facial expression, hand gesture, etc. for clues concerning his quantitative easing plans.

As you’re likely aware, recent talk about whether the Fed will or won’t taper bond purchases has kept commodity investors on the edge of their seat. 

Bernanke’s tapering statements a few weeks ago sent most commodities down steeply. 

In fact, gold crashed $175 an ounce over a span of seven trading days after the Fed Chairman struck a hawkish tone in his June 17th press conference.  The remarkable downdraft sent the yellow metal to its lowest level in years. 

As you may know, Bernanke has backtracked on his statements since then and gold is reacting favorably.  The yellow metal is rebounding nicely and now sits within a whisker of $1,300.

It goes without saying that what Bernanke says today will play a big role in the future direction of gold, along with many other commodities.

Here are the commodities I’ll be watching as Bernanke speaks…

Gold – This one is obvious.  The yellow metal is up nearly $100 an ounce over the past two weeks.  If gold is to rise further, Bernanke’s testimony needs to be overwhelmingly dovish.  For example, he needs to say the Fed will be accommodative for as long as needed to bring unemployment numbers down to normal levels.

On the other hand, if Bernanke gives any sign that the Fed will start tapering this year, we could see the yellow metal retest recent lows at $1,200.

Palladium – I talked extensively about this metal in Monday’s article.  Bullish long-term fundamentals and South African labor issues are poised to push palladium above yearly highs at $780 an ounce.  If Bernanke is dovish in his speech today, this metal could break that level sooner than many investors expect.

WTI Crude – Oil is an interesting story right now.  As you may know, the commodity is the top performing hard asset of the past month, rising 8.2%.  However, most of crude’s bullish move to $106 a barrel has been based on Middle East fears.  It’s quite clear that a substantial fear premium has been built into the oil market in recent weeks.  As a result, it’s unlikely crude will trade substantially higher without some sort of correction first.  If Bernanke’s speech is hawkish, it may be the signal crude traders are looking for to sell this market.

Now be aware…

Bernanke’s prepared remarks to Congress hit the wires at 8:30 am eastern time this morning.  So there’s already been a market reaction by the time you read this. 

However, things will likely get even more interesting as the Fed Chairman takes the hot seat in Washington at 10:30 am eastern time.  Lawmakers will grill him with questions regarding the US economy, which should provide further insight into the Fed’s plan in coming months.

Stay tuned to Commodity Trading Research for continued analysis and trading ideas!

Until Next Time,

Justin Bennett

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Category: Crude Oil, Gold, Palladium

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.