QE2, sort of

A bunch of bouncing yesterday from the FOMC policy statement. The dollar was charging up prior to the announcement, possibly because traders anticipated a new start to Quantitative Easing would rip the floor out from under the dollar.

The Fed decided to keep QE limited for now. I read some smart commentary a few days ago that gave compelling reasons why the Fed would not launch a new round of full-on QE at this time. This would give the rally in equities a little more room, and bonds bounced even higher on the news.

The end result is mixed. There were tepid bounces in gold and the Euro, but the Yen pairs look slightly worse off, meaning risk aversion is still hanging around, if not a bit stronger. The dollar dropped then bounced up. Equities got bought, again on low volume, but could not close up for the day.

The next few days will be interesting. Either buyers come rushing back in to push equities higher, or a general lack of confidence will gain strength. With gold we may have seen the top that was expected Monday-Tuesday, and now down to what may be a higher low. Or it could catch a reflation bid along with equities, if buyers come back in.

The one thing that seems likely is the dollar has started a bounce and bonds are still strong. On the whole, that doesn’t sound gold-positive in the short term. But keep in mind that once bonds start to drop, gold could move up in a hurry.

Here is an interesting piece on JP Morgan in the mainstream press. Maybe the show is ending for these guys, if public opinion really starts to notice the shenanigans going on at the expense of Main Street.

http://www.huffingtonpost.com/janet-tavakoli/jpmorgans-losses-from-ind_b_676042.html

This entry was posted on 11/08/2010 at 05:28 am and is filed under Gold. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

| Print