GO
Loading...

What Bernanke’s testimony means for gold: pro

Wednesday, 17 Jul 2013 | 10:16 AM ET
Kelvin Ma | Bloomberg | Getty Images

It's a big day for Big Ben, and gold should respond accordingly.

Look for gold to fish for stops above last week's $1,297 high, as it tests $1,300 upon the release of the text of Chairman Bernanke's prepared remarks to the House Financial Services Committee. These remarks helped bond prices and equities rally, in addition to gold.

(Read more: Stocks modestly higher as Bernanke speaks; All S&P sectors gain)

Investors are eager to see gold back above $1,300, after Bernanke said just last week that a highly accommodative monetary policy will remain in place for the foreseeable future. One has to question, though, what this really means.

As Bernanke appears before the House Wednesday to present the Federal Reserve's semiannual monetary policy report, the main topic of discussion will be the Fed's potential exit of the $85 billion monthly bond-purchasing program. The other big topic on the table will be the benchmark interest rate.

Traders brawl on gold
Anthony Grisanti and Jeff Kilburg have a fierce fight on where gold's going next. "Are we looking at the same chart?" With CNBC's Jackie DeAngelis.

During questioning, will Bernanke allude to a tapering of this bond-purchasing program before the end of 2013? If so, we expect a sharp selloff in gold to ensue, leading bullion to retest support at $1,266 to $1,268 before the close Wednesday. A close below this level will signal "game on" for the bears.

(Read more: In what may be Bernanke's last hurrah, tough questions loom)

If Bernanke does not foresee tapering before the end of 2013, then when will we see it? The first quarter of 2014? Does this delay really matter? No, but it can prolong a consolidation in gold, and help run stops above $1,300. But only a close back above major resistance at $1,323 to $1,326 will signal the neutralization of this bear market.

The bottom line is this: Expect the market to change course on every statement. Trade smart, or hold off and wait for a confirmed close to pick the direction for you.

Rich Ilczyszyn is founder and CEO of iiTrader. Follow him on Twitter @iiTrader.

Watch "Futures Now" Tuesdays and Thursdays at 1 p.m. EDT exclusively on FuturesNow.CNBC.com!

Like us on Facebook! Facebook.com/CNBCFuturesNow.

Follow us on Twitter! @CNBCFuturesNow.

Contact Futures Now

  • Showtimes

    Watch Futures Now Tuesdays & Thursdays 1p ET exclusively on cnbc.com!

Sponsor Links

  • CME Group brings buyers and sellers together through its CME Globex electronic trading platform and trading facilities in New York and Chicago.

  • Take your trading to the next level with a platform that lets you trade stocks, options, futures and forex all in one place with no platform or data with no trade minimums. Open an account with TD Ameritrade and get up to $600 cash.