-- Posted Wednesday, 18 March 2009 | Digg This Article
| Source: GoldSeek.com
April Gold: Open= 915.2 High=954.0 Low=882.7 Last= 945.1 +28.2
What a difference a day can make. As of yesterday afternoon, the gold market was closing below a four month trend-line. This morning, gold was nearing $880 per ounce, down almost $30, and the broad commodity market was in the red. Silver, as well, was down by the tune of 70 cents. Coming into the FOMC meeting, the general consensus was what Mr. Bernanke already told the general public over the weekend, that the key interest rate would remain between 0.00 and 0.25% for some time to come.
At about 11:10AM PST, the Fed announced not only its decision to keep interest rates steady but a stunning statement that it would be purchasing up to $350 billion worth of long-term US debt over the next six months. The Federal Reserve will also double the amount of purchases of debt issued by Fannie Mae and Freddie Mac, from $100 billion to $200 billion. What does this amount to?
The Fed is doubling-down on the programs it deems as vital to restoring the health of our economy. With no room left to cut interest rates to stimulate growth, the Fed has turned to pumping money into the system. In gentle terms, this is calling ‘priming the pump’ but the Fed in reality is on its way to having primed the pump, pulled out the choke, and is going to town on the pull cord.
Over the past few weeks, the gold market reached an overbought status with too many buyers chasing the market. A healthy correction began but quickly the market found itself unable to respond to even mild stimuli, like a weakening dollar. As of this morning, gold was being routed and on its way to consecutive closes below the trend-line, which would have been a signal for a deeper pullback in the market. It would take another nose dive of in stocks or higher inflation readings in the PPI and CPI to turn this market back around.
But the Fed came in today with fresh news, bringing inflation fears roaring back to the forefront of gold traders. It is not as though ideas of higher inflation in the future dissipated two weeks ago but markets need fresh fundamentals to keep any market driving in one direction, and gold either needed more news or it would fall back to better support levels.
Today’s reversal is stunningly large as the high-low range encompasses the entire range of the market in the past two weeks. The move back above $944 now puts bulls back in control of this market for the time being. The next upside objective becomes $1070 to $1094. As of this morning, the market was begining to look more and more bearish in the short term, but when the facts change, one must change, as well.
Review charts on these markets here www.britefutures.com. Remember that futures and options can be used for bullish or bearish positions; feel free to contact me to discuss trading strategies. Each contract/option = 100 ounces, a $1 move in a futures contract = $100.
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Thomas Hartmann
Altavest Worldwide Trading, Inc.
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-- Posted Wednesday, 18 March 2009 | Digg This Article | Source: GoldSeek.com
