By FXEmpire.com
The gold markets fell for much of the session on Wednesday as the Federal Reserve meeting failed to show anymore simulative efforts beyond extending the “Operation Twist” bond buying program. This was a bit of a disappointment to some who had thought the Fed was going to do more, and as a result the US dollar got a bit of a bid during the US afternoon.
However, by the end of the session, the gold markets had bounced a bit. In fact, the candle for the session is a hammer, and it now looks as if the $1,600 level will hold as support. The gold markets are in a longer-term uptrend over the last decade or so, and as a result it makes sense that there will be a natural propensity to buy on dips. While it is true that the gold markets have been grinding lower over the last few months, in the big scheme of things – this is simply a blip on the radar.
The bounce at the end of the session shows that the markets are still thinking that further easing is coming and Mr. Bernanke did in fact say that the Fed is willing to act if necessary. This should continue to push the recent “sugar high” that the markets have been running on as the easy money simply makes assets more attractive – even though it does little for the real economy.
The idea of an easing Fed will drive the gold markets higher overall, and now it has to take a few levels out in order to have any serious clarity. The $1,640 level above is the massive resistance that we are fighting against, and the $1,500 level below is our “line in the sand”, and we need to see prices close below that level in order to get aggressively short. However, looking at the charts it is obvious we are making higher lows lately, and it now seems more likely than not that they markets will break over the resistance level as easing will probably come later this year.
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Originally posted here
