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.
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.
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.
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.