By FXEmpire.com

Gold markets fell for the majority of the session on Monday, only to bounce back and form a bit of a hammer. The biggest problem of course is the fact that this hammer is in the middle of massive congestion, so it doesn’t carry much weight in our opinion. With this being the case, we are currently awaiting the comments out of Mr. Bernanke later this week in front of Congress to decipher whether or not there is a possibility of more quantitative easing.

It appears that based upon some risk currencies during the session on Monday that many are out there expecting him to say something. This would be based upon poor retail sales again Monday morning, and as such this would have many people thinking that the Fed will feel the need to step in and do something.

However, will the market hasn’t moved that much and will continue to be somewhat cautious until after the chairman’s testimony. With the action in the stock market on Monday, it appears that many traders in the United States believe that Mr. Bernanke will go ahead and signal some kind of easing to come. This is why we may see a sudden move in the gold markets during the Tuesday session, but we will ignore them all until we see a break above the $1650 level on the upside, as it would show a serious momentum and a breaking out of the recent consolidation area. If we do get the signal, we are long and waiting for a move all the way to $1700, and possibly even $1800.

Looking at the downside, we do not see much room to go lower in till we get below the $1500 level. This is predicated on the fact that the $1500 level will most certainly be a psychologically important area, and as such we expect some type of reaction as far as support is concerned. On the whole, we do prefer going long of this market, and believe that several central banks around the world will in fact begin a new round of easing. As this is priced in dollars though, we need to see the Federal Reserve do it in order for this market to really accelerate to the upside.

Click here a current Gold Chart.

Originally posted here