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Fed Minutes Pummel Stocks, Metals; Dollar Soars

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Fed Minutes Pummel Stocks, Metals; Dollar Soars

Federal_Open_Market_Committee_Meeting

The minutes from last month's Federal Reserve Open Market Committee (FOMC) were released this afternoon, exposing dissention over continuing the $85 billion a month in bond purchases that is current policy.  the news caught the already weak stock and metals markets square on the chin and sent them reeling.

The dollar, which was acting the playground bully earlier in the day against the other currencies, got an afternoon boost from the FOMC news, cresting the dollar index over the 81 mark. Oil hit a five-week low as Saudi Arabia announced it was increasing production to feed a growing demand from China.

Bank of England minutes showed that the possibility of a rate cut to stimulate an economy mired in recession was discussed, sending the sickly sterling to an eight-month low against the dollar, and a 16-month low against the euro.

Gold hit a seven and a half month low of $1,558/oz in intraday trading, and silver hit a six-month low of $28.21/oz. Both recovered slightly in afternoon trading, but were headed for closes near the low.

Much talk about gold hitting the "death cross" (where the 50-day movig average goes below the 220-day moving average) occupied financial blogs and news outlets today, but as the Globe and Mail relates, this ominous-sounding occurance doesn't necessarily portend doom for the yellow metal. They quote senior marketing analyst Michael Hewson of CMC Markets UK as noting that there have been six death crosses in gold in the last ten years, and only ONE actually foretold an extended drop in gold.

The article notes that the last gold cross (where the 50-day moving average goes above the 200-day average), in Septermber 2012,  did not appear until after a 50-trading day rally. And, now, here we are at a death cross just a couple months after the golden cross.

 

by David Peterson

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