The Fed may taper again one week from today.

Gold prices were little changed over the past week as the rally that began at the start of the year lost steam. The current rebound off December’s low near $1,180 hasn’t been that powerful, which is in contrast to when prices first bottomed at $1,180 last June. Following that initial bottom, prices zoomed higher over the next two months, hitting $1,350 in July and $1,450 in August.

This time around, prices reached as high as $1,260—granted, it’s only been about three weeks since the December bottom. 

At this point, we don’t necessarily see any specific positive catalysts to send prices higher. Rather, it will be gold’s ability to shrug off bad news that will be most telling, and dictate whether we see continued gains in prices.

The next test will come on Jan. 29, when Ben Bernanke and the Federal Open Market Committee make the last monetary policy decision in which he is at the head of the central bank. Bernanke is set to retire at the end of the month.

Currently, expectations are that the FOMC will go ahead and taper its bond-buying program by another $10 billion, bringing monthly purchases down from $75 billion to $65 billion. If that happens, we will look to see gold’s reaction.

Following the first taper in December, gold bounced off $1,180. Will the yellow metal test that level again? Or will it shrug off the news and build on the current rally?

In our view, if gold can break $1,275 on the upside, it will indicate the rally has legs, and prices may continue higher to above $1,300, even $1,400. On the other hand, a move back below $1,200 will put the bears in charge once again.

GOLD (YTD)

SILVER (YTD)

PLATINUM (YTD)

PALLADIUM (YTD)

….read pages 23 4 5 & 6 HERE