Well, to answer the question I posed in the title of this article, I will ask you a further question (yes, I know, just like a lawyer answering one question with another question): What effect did the Fed and their QE programs have on gold? And, as you all know, the simple answer is "none."
In fact, as we all now know, it surprised almost all market participants that the metals literally tanked in the face of unprecedented quantitative easing programs. Most even thought I was crazy for shorting the metals into the QE announcements. But, if one wanted to note any form of causation, one could even say that QE "caused" the metals to tank. (I don't think that any of us would really believe that). So, why would any easing conducted by the ECB have any different effect?
Well, I can actually say that there is a possibility that there may be a positive "effect," as viewed by market participants. The main question will really center around whether gold can complete its downside fall before the ECB actually engages in easing. If gold continues to slide to new lows and maintain below resistance over the next two months, then we could see a true bottom later this summer. If the ECB should engage in easing thereafter, then most market participants would view any easing as the proximate cause of any rally which ensued. However, those that understand how sentiment drives the metals market know better, and may even get a chuckle at such a suggestion, and recognize it for the intellectually dishonest analysis for which it would be. But, I will assure you that will be the common proximate "cause," as recognized by the great majority of market participants if this should occur.
Now, although it seems so many are convinced that the low that was seen last year at this time was "the bottom" in the metals, I am not as convinced. There is nothing that is currently presented in the sentiment patterns I review that tells me we have a long term bottom in place for this 3+ year correction. Of course, I do see the potential to rally back to the 126/128 region, or even as high as the 140 region in GLD before heading down to new lower lows, but the market has a lot to prove before I can adopt such perspectives. In fact, we have not even taken out the minimal resistance levels for me to even consider that potential.
As some of you may recall, I have discussed the difficulties in being able to track corrective market action in past articles. While impulsive action is relatively easily tracked, corrective action is exceptionally variable and can take many unexpected twists and turns. It is for this reason I am getting very cautious in my short positions at this time. The "easy" shorting has been done already, and it will likely get much more complex. There are several different pattern possibilities that I am watching at this time, and as I said last week, one can even take GLD back up as high as the 140 region before it moves down to make new lows. But, as I also said, there is much resistance overhead that must be overcome before I can view that potential as a higher probability.
So, for now, the main resistance region I am watching is the 121.50-122 region. As long as we remain below that region, I am looking for GLD to drop to the 115 region, and as long as we remain below that region thereafter, we would be targeting the 103 region in a strong drop later this month. However, should that region be broken through to the upside, it opens the door to several other possibilities which can only be quantified based upon the manner in which the market moves up due to the variable nature of corrective market action. And, I have provided more detail into those possibilities on my site for those interested.
Disclosure: I am long SLV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I also have intermediate term GLD puts