Gold was all over the place today but it really took it on the chin during the Bernanke press conference. It actually broke down below the bottom of its trading range but managed to recover somewhat and claw its way back into the range.
If it breaks below today's low, look out... it will test round number and psychological support at $1200. Right now, it looks tentative to me.
I repeat what I wrote earlier - based on my interpretation of Chairman Bernanke's comments, the Fed is hoping to strike a balance between deflation and inflation in the sense that they want to see inflation but they want to see it tame. What they DO NOT WANT, is a resurgence of deflation. A sinking gold price (below what level I am unclear) that stays down is a deflationary signal. Thus, I suspect the Fed would not welcome a gold price that is significantly lower than current levels, especially if that gold price were accompanied by a collapse in certain key commodity prices.
If that were to occur, in conjunction with a labor market that shows no signs of strong improvement, I could easily see the Fed INCREASE bond buying. At this point, we are going to remain heavily dependent on subsequent economic data releases for a clue as to whether or not inflationary pressures are increasing or not. I believe that the payrolls numbers are going to be even more significant than they have been moving forward.
I noticed that once again silver could not maintain its footing above the $20 mark for long. If growth both globally and domestically is indeed picking up, one would expect silver to move higher alongside of copper. The jury is still out.
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