Clutch your minuscule gold bars, goldbugs. Data in the US reflects an improving US economy, one that is possibly strong enough for the Federal Reserve to begin tapering its monthly bond-buying program.
Many pundits think the Fed could start tapering as early as September and ahead of this key decision the price of gold looks to be stuck in a holding pattern. Prices fell as low as $1,200 (£785) an ounce in June, but the yellow metal quickly rebounded to $1,350 an ounce in July. It then retreated to $1,280, before clawing back to its current level around $1,330 an ounce.
If gold is going to rally from here, it will have to overcome massive technical resistance and there will have to be some strong fundamental reasons why gold would recover in the face of tapering. The eurozone crisis has provided such a spark before, but serious fears of debt contagion resurfacing are doubtful for the time being. Of course, tapering might not actually begin next month - as some mixed recent economic data would suggest.
Certainly, summer is traditionally a weak time for precious metals ahead of soaring physical demand during religious festivals in the autumn and winter in the developing world - and July and August have provided some great buying opportunities in the past. But this year we expect the price of gold to drift near or below its current level until further news breaks regarding potential tapering timelines - or changing US economic data alters the situation.
From a technical perspective, gold bears continue to hold the overall near-term advantage. Should gold drop below initial support around $1,315, we may see $1,280 again. Conversely, should gold break past resistance at $1,350, a promising bull run would quickly be on the cards, targeting a return to at least $1,400.
