FOMC report sends all markets down
The markets today, from equities to commodities, are a sea of red in the wake of the FOMC statement yesterday. The FOMC commentary was interpreted initially as being largely bullish. The bullish fervor has clearly died off though. And just as seems to be the norm of late, market participants have been caught off guard on positions predicated on traditional correlations as the precious metals sweep lower. The Fed announced a new bond buying program at the end of operation Twist and an extension of extremely low interest rates until the unemployment rate falls to 6.5%. While this should have kept gold well above $1,700, the market instead chose to react to Federal Chairman Ben Bernanke’s comment that the Fed does not have the weapons in its arsenal to combat the impending US fiscal cliff situation.
Gold’s sell off began in Asia and the liquidation pressure was carried on to the London and New York trading sessions. The yellow metal broke below $1,700 as stops were triggered and found bids ahead of significant support at $1,685 (a triple bottom from last week and now the fourth point on a long term trend-line dating back to mid-July). Until gold breaks this level decisively, trades will be wary to go short. Silver, as is often the case for it, has been more volatile than gold today and is already down 3%. Its next major area on the downside comes in at the 100 day moving average of $32.05.
