So, many on the FOMC believe that QE will be necessary if things continue in the way that they have been going for months now. Fine. but, inflation is tame yet M2 is rising at nearly r8% again and the monetary base is expanding as repo operation have begun again for the first time in 4+ years. It’s always a hoot watching the futures market right before the release of anything Fed related because if there is one thing that is Keplerian about the markets it is the direction of Gold (AMEX:GLD) in those moment of anticipation of the pronouncements from the monetary wizards of the hill, which is, of course, down.
After hovering around $1640 an ounce all morning since the European open at 3am, gold dropped sharply to $1634 right at the COMEX close in the low volume switch over to the other exchange and bounced around with a negative bias until the FOMC minutes were actually released. Once that happened, reality took over and Gold, along with Silver (AMEX:SLV), took off like a shot; putting on $20 and closing the afternoon session on the Globex at $1654.15 on the October contract. Silver came along for the ride and pushed up to$29.76 per ounce putting it on par with the June 4th high of $29.81. After that there isn’t any serious resistance for Silver until $37.50 or so.
For Gold, $1650 has been a very important level which needed to be breached. Expect some bumbling around in this area, especially after two violent up days like we’ve just had. Gold is simply not allowed to rally more than a couple of days at a time, but what is important is now the weekly closing price as well as the price in a week, which will be the expiration of futures contracts. The fireworks then will be impressive to say the least.
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