A few days ago, we suggested that the gold prices were in the pursuit of clarity-since the markets were deliberating on the possible trends the yellow metal will follow given the uncertainty of the market fundamentals. This blog is written to derive the crux of the matter as the investors certain the uncertainty of the issue.

The statement of the Fed out of its August meeting suggested that it is closer to implement some form of additional easing. However, employment numbers of Wednesday and Thursday have beaten expectations. Bad employment numbers have been an important support for the gold prices since May. With such positive numbers, the support will weaken for the coming weeks. It does not cancel out the chances of a QE3 in September, but it certainly reduces it, at least till the next employment numbers comes out in a month from now.

The more important event last week, which took the markets by storm, was Mario Draghi’s press conference after the ECB board meeting. Basically, Draghi announced that the ECB is now ready for a full-fledged QE programs. Theoretically, money printing by the ECB will result in an upward rise for the price of gold. The dramatic fall of about $100 that prevailed on 28^th February, when LTRO2 was executed is still fresh in the memory of many gold faithful’s.

Apart from the impact of last week’s news, gold prices should continue to be positively influenced by buying from central banks. Also, the second half of the year is historically a positive period for gold. However, China, one of the main consumers of both investment and jewelry gold, has been acclaimed as economically slow.

Recommending a correct trading strategy is not in our dictionary, but we would like to inform the readers to enter the market long or short depending on the price action in the coming days or weeks. However, the investors should also remain of a possible upside behavior should Bernanke decide to surprise the markets and announce QE3, for instance, during his annual speech in Jackson Hole. The moment of truth for gold is invariably close!

Note: The blog is just an expression of the author’s opinion and cannot be deemed responsible for any losses incurred.