The last two weeks have been positive ones, and not just for equities, as gold bugs finally found something to celebrate with a return of some much needed bullish momentum.

From a technical perspective the key support level for the gold price was one that I referred to in a previous post, as denoted by the yellow dotted line in the $1280 per ounce level.

This price level duly held, and indeed the precursor to the move higher was the combination of a gravestone doji followed by the long legged doji and associated high volumes.

This combination of price and volume, coupled with the support platform, duly provided the requisite springboard for the current move higher.

However, as markets await the outcome of the FOMC meeting, the question now is where next for gold? And the answer to this can be found, in the part, in the volumes of the past few days.

Since mid October as the precious metal through the $1300 per ounce price point and beyond, volumes on the associated up candles have been falling, which is not a sign of strength, and certainly suggestive of a market that is running out of bullish momentum.

In addition, each of the accompanying price spreads have been narrowing – again a further sign of potential weakness. Furthermore, gold also appears to be struggling at the $1360 per ounce price region, which is once again being tested in today’s gold trading session.

The positive news, from a technical standpoint, is that the volume at price histogram now clearly defines the strong platform of price support below which extends from $1300 through to $1320 per ounce, and if we do see any reversal in gold prices, this should provide the requisite buffer to any move lower.

Moving to the weekly gold chart, this is also confirming the analysis above, and in particular the last two weeks where we have seen gold prices rising but on falling volumes, again not a good sign for gold bugs.

With the gold dollar relationship now apparently re-connected, much will depend on today’s FOMC statement and the question of tapering. The general view is that the FED will leave well alone, and indeed the markets already appear to have factored this in, and one only needs to consider the 10 year bond yield for evidence which at time of writing is trading at 2.51% and looks bearish.

Equity only readers gain exposure to the gold through the SPDR Gold Shares Trust (GLD, quote) ETF that seeks to replicate the performance, net of expenses, of the price of gold bullion. The GLD trust holds gold, and is expected to issue baskets in exchange for deposits of gold, and to distribute gold in connection with redemption of baskets.  Readers can also access the gold market through the iShares COMEX Gold Trust (IAU, quote) ETF seeks to replicate, net of expenses, the day-to-day movement of the price of gold bullion.

Anna Coulling is a trader with over 16 years experience and founder of AnnaCoulling.com