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February 24, 2010 – Prices dropped again this morning as technical indicators and concerns about the upcoming Congressional testimony by Fed Chairman Ben Bernanke both moved against gold investment. At 11:00 AM EST today, gold prices were down 20 cents for the day to $1,104.30 per ounce.

Prices fell below $1,100 for a time yesterday, triggering a number of stop loss orders and prompting technical investors to pull back on their risk appetite. "We are back below $1,100 an ounce. That's a technical level we managed to bounce from a couple of times last week, we are now through and we have to find support once again," said Ole Hansen, senior manager at Saxo Bank. "The level is around the $1,073 area."

Bernanke’s testimony before Congress is likely to supply both facts and fuel, as the Obama Administration hopes to demonstrate that it has inflation under control while painting an optimistic picture of the economy. "If he signals that the exit strategy is picking up pace, either the prospect of higher yields will bolster the dollar, or a nervous market, post the consumer confidence figure, will worry about activity and swing toward the dollar,” according to Credit Agricole CIB.

For anyone involved in gold investment, this is a potentially positive situation. The technical indicators that pushed prices lower yesterday were largely defensive in nature and based on a correction of the gains from the past month. A correction now leaves little reason for investors to jump out of the market later today should the news be against gold; should Bernanke paint an especially bleak picture, gold prices could rise dramatically as the dollar becomes the risky investment.

Though likely trying to downplay it, Bernanke is going probably to admit that inflationary pressures are mounting and the Fed is obligated to act before the situation becomes too serious. With a potential positive outcome for gold a possibility, Credit Agricole CIB may be correct when it says, "Hence, without a clear mood change it looks like heads I win and tails you lose as far as the dollar is concerned." 

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Stewart Lawson

Senior Staff Writer - Gold-Investment.info