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The gold markets fell slightly on Tuesday as the world continues to wait for the Federal Reserve and its announcement later today. The Federal Reserve is thought to be getting ready to ease and as a result the US dollar has slid a bit over the last couple of sessions. The market will more than likely be a bit pressed to get too much higher before the statement later today, so trading will more than likely be confined to later in the US session as the statement isn’t due until 2:15 pm Eastern Standard Time.
The market will more than likely be in a “wait and see” mode, and as a result we think that the wisest move is to probably wait until after the announcement, and more importantly – the reaction. The area that the market in should be paid attention to as well, as the $1,640 level has been so resistive lately. The fact that the market is hovering just below it suggests that perhaps the market is starting to position itself long ahead of the announcement. This should mean that if the Fed decides to ease, there is a strong chance that the Dollar will weaken, and the gold markets will surge as a result.
Even with that being said, there is a lot of resistance all the way up to the $1,680 level or so and this makes us a bit leery of the initial knee-jerk reaction. We need to see a daily close above the $1,640 level in order to believe the rally as there will be a lot short-term traders going in and out of the markets, and the truth will be told at closing time.
If we can get the daily close above the $1,640 level, we are ready to go long of this market as we think over time it should rise much, much farther. The selling of this market isn’t safe for us until we see the $1,500 level give way. The Fed and its decision will be the next catalyst for this market, this much has become obvious.