Gold is down $20 today to $1366 to the lowest since May 23.
The loss is especially troubling today because it comes during a period of US dollar weakness. The Dollar Index is down 0.2% today with the euro and sterling both making gains. Today is the worst trading day for gold since June 7.
Kitco analysts Peter Guy noted that physical demand from North America and Europe is down 80% from the April frenzy.
Tomorrow is obviously a big day for gold. If Bernanke hints at tapering, the US dollar will rally and gold could fall substantially. On the other hand, a more likely scenario is for the Fed to announce it will continue to taper until unemployment falls. The knee-jerk reaction to this will be higher in gold.
My inclination is to sell the kneejerk higher because I believe Bernanke will be dovish. I will be watching closely to see how the market reacts. My guess is that gold sellers will quickly fade the rally because the market is continuing to struggle following the April washout.
The key chart levels are the May low at $1339 and the April low of $1322.
