-- Posted Wednesday, 18 September 2013 | | Disqus

The Metals:

Gold dropped $18.50 to $1291.40 in Asia before it rebounded to $1307.52 in London and then fell back to $1296.00 by a little before 10AM EST, but all bets were off when it became time for the fed’s highly anticipated announcement on possible tapering of its stimulus program.  Gold initially climbed up to $1312.02 just before the announcement and then jumped to $1349.35 just after the announcement before it pared its gains a bit in the next hour of trade, but it then climbed to a new session high of $1367.20 in the last hour of trade and ended with a gain of 4.31%.  Silver slipped $0.52 to $21.20 at about noon EST, but it then soared to as high as $23.213 and ended with a gain of 6.31%.

Euro gold rose to about €1009, platinum climbed $42.30 to $1460.00, and copper climbed 10 cents to about $3.32.

Gold and silver equities fell over 1.5% by late morning, but they then climbed steadily higher after the fed’s announcement and ended with about 9% gains.

The Economy:

In surprise, Fed decides not to taper MarketWatch

Fed sticks to stimulus, worried about growth soft spots Reuters

Fed Refrains From QE Taper, Keeps Bond Buying at $85 Bln Bloomberg

U.S. CEOs less optimistic on economy - survey Reuters

U.S. mortgage applications rise as rates ease - MBA Reuters

Tomorrow brings Initial Jobless Claims, the Current Account Balance, Existing Home Sales, the Philadelphia Fed, and Leading Economic Indicators.

The Markets:

Charts Courtesy of http://finance.yahoo.com/

Oil jumped higher after the Energy Information Administration reported that crude inventories fell 4.4 million barrels, gasoline inventories fell 1.6 million barrels, and distillates fell 1.1 million barrels.  It then climbed even higher after the fed’s announcement and ended with a gain of 2.5%.

The U.S. dollar index traded mixed before the fed, but it then plummeted over 1% following the fed’s decision and ended at its lowest in almost 7 months.

Treasuries fell before the fed, but they then soared higher afterwards as the yield on the 10-year fell to its lowest in almost 6 weeks.

The Dow, Nasdaq, and S&P traded mostly lower before the fed, but they then jumped higher following the announcement and ended with about 1% gains.

Among the big names making news in the market today were Walgreen, Starbucks, General Mills, Boeing, FedEx, Pandora, and Apple.

The Commentary:

“Wash, Rinse, Repeat - That is basically what we got from the Fed today instead of the $10 billion cut in bond buying that the market had priced in. I mentioned yesterday that based on the very benign inflation environment, the Fed might just stand pat due to the recent lousy economic data. They did just that. Personally I think it was two factors which swayed them in this decision - more on that later.

Stocks loved it, bonds loved it and gold loved it. The Dollar hated it. What else is new?

It is perverse in the sense that interest rates on the long end of the curve had been steadily moving higher for about 3 months now based on the increasing expectations of a tapering move by the Fed. We have been paying close attention to the yield on the Ten Year Treasury and have noted that it just missed hitting the 3% level at the beginning of this month.

Here is what I consider perverse about this... consider this... the Fed starts some hawkish talk and begins to prepare the markets for a slowdown in the rate of its bond buying program. The market reacts to this apparent change in policy by bidding up interest rates. This then results in mortgage rates moving higher.

The Fed, obviously alarmed at what they believe will negatively impact the very fragile real estate market then backs away from any tapering plans whatsoever sending interest rates on the Ten Year back down to the 2.75% level where they are currently sitting as I type these comments.

Where does this leave us? Quite frankly, in an enormous mess the way I see it. The Fed does not have the luxury of doing a surprise sneak-attack on the markets without preparing them for a tapering of the bond buying program. For the Fed to announce out of the clear blue sky, without the least bit of warning, that it was going to scale back its bond buying program, would send the stock market into convulsions and rattle the entire interest rate market as well as the currency markets.

They therefore must prep the markets, plowing the ground and giving the markets time to come to terms with any change in monetary policy in order to avoid chaotic market reactions. Here is the catch however - in giving the markets time to prepare, the market response is to sell bonds along the long end of the yield curve thus resulting in rising long term rates. This negatively impacts the real estate market and borrowing in general as the rotten employment picture prevents many people from otherwise qualifying for loans that they might have previously been able to had rates remained at lower levels.

Then the times comes for the Fed to make the actual announcement that they have spent so much effort prepping the markets for only to realize that these same markets have pre-empted any need for the Fed to act. The result? - the Fed does nothing whatsoever!

In short, I can easily envision a scenario in which the Fed is completely trapped unable to do anything at all well into the foreseeable future. It is going to take STRUCTURAL REFORMS to improve the job market and as long as the current Administration is in power, I do not see that happening any time soon. Thus the status quo continues and goes on and on and on...

In regards to gold, it is scooting higher as a large number of shorts were forced out with today's surprise move by the Fed. It did take out that overhead resistance at $1330 which is a positive and is also now trading above $1350, another resistance level. There is $1360 which I am watching right above where it is currently trading to see how it handles that. Beyond that $1380 is the next target.

The key to gold will be whether or not the speculative world believes that the continuation of the Fed's QE4 policy unabated will generate any long-anticipated inflation. Obviously the bond market does not expect any or bonds would not be moving sharply higher. Thus far inflation has been tame. It is going to take a change in perceptions in that regard to bring in a brand new wave of hot fund money into gold as well as the rest of the commodity complex.

The ironic thing about seeing crude oil and especially gasoline rallying sharply higher today is that rising energy prices, while inflationary in their own right, also have recently tended to be seen more as a brake or drag on economic activity and consumer spending and thus are seen as factors leading to a slowdown in growth rather than a catalyst for higher inflation. If specs begin piling into the energy markets based solely on the lack of tightening from the Fed, then these specs may short-circuit any hopes that the Fed has that its latest NON-MOVE will be stimulatory in nature.

Herding cats will prove easier than herding these destructive hedge funds.

Oh what a tangled web the Fed has created!”- Dan Norcini, More at http://www.traderdannorcini.blogspot.com/

GATA Posts:

CFTC may want Morgan to admit market manipulation

The Statistics:

As of close of business: 9/17/2013

Global Gold ETF Holdings

[WGC Sponsored ETF’s]

Note: No change in Total Tonnes from yesterday’s data.

COMEX Gold Trust (IAU) Total Tonnes in Trust: 177.56: No change from yesterday’s data.

Silver Trust (SLV) Total Tonnes in Trust: 10,497.74: No change from yesterday’s data.

The Miners:

Nordgold’s (NORD.LE) deal with Columbus Gold (CGT.V), Hochschild’s (HOC.LN) possible acquisitions, Highland Gold’s (HGM.L) first half net profit, and Alexco’s (AXU) drill results were among the big stories in the gold and silver mining industry making headlines today.

WINNERS

LOSERS

Winners & Losers tracks NYSE and AMEX listed gold and silver mining stocks that trade over $1.

Please see Yahoo’s Mining/Metals News Wire for all of today’s mining news.

- Chris Mullen, Gold Seeker Report

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• http://www.capitalupdates.com
• http://www.goldseek.com
• http://www.silverseek.com
• http://www.goldreview.com 

© Gold Seeker 2013

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-- Posted Wednesday, 18 September 2013 | Digg This Article | Source: GoldSeek.com

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