Market awaits Fed minutes

Feb 20, 2013·The GoldMoney News Desk

Gold and silver have stabilised over the last 24 hours, with traders waiting on the release of the latest batch of Federal Reserve minutes – for their 29-30 January Open Market Committee – later today for more indicators about the direction of US monetary policy.

The FTSE All-World equity index is at a new four-year high, while the dollar and US Treasuries have been under pressure, with the yield on the 10-Year Note trading at 2.03% earlier. Don’t worry: according to one pundit on American financial TV, the stock market is “rigged to go higher”. True enough, as the surge in Fed asset purchases since late last year testifies to (shown in the chart below).

St Louis Adjusted Monetary Base

Negative sentiment towards gold is reaching new heights (or should that be depths?) with Barron’s ($) asking whether or not the “(anti-) gold rush has begun”. The magazine notes that speculator’ interest in put options – that is, bets that will earn money on a declining price – is increasing.

Likewise, as Jesse notes, the last Commitments of Traders report for gold suggests that the bullion banks are starting to cover, with small speculators and hedge funds taking the short side of the trade. This could be a contrarian indicator ¬– similar to last summer’s doom and gloom about the euro – but only time will tell.

Readers may be interested in James Turk’s take on the recent “audit” of the Fed’s gold bullion. “Complete rubbish and propaganda” as James says. One basic fact for people new to this topic to consider is that just 5% of the US Treasury’s gold is held with the Fed. The other 95% is stored at army bases at Fort Knox and West Point, with some also held at the Denver Mint. So when people talk about the Fed’s gold, don’t go thinking they’re talking about the US government’s official stash.

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