Fed Tapering Ignites Stocks, Crushes Gold
The Fed began to cut down its purchases of treasuries and mortgage-backed securities, resulting in an almost 300 point jump in the stock market and a 30 point drop for gold. The thought is that the stock market didn't like wondering what the Fed would do and now that it knows it's happy. Conversely, the tapering brought gloom to gold, as it can't rely on persistent increasing monetary madness to boost its price.
Or so the "logic" goes.
So where do we go from here? Well, predicting usually never works out. But we can say that a stock market in a strong uptrend, as this market has been, typically reacts this way to the slightest hint of what it might consider good news - in this case the end of wondering whether the Fed will or won't do "x," i.e., taper its bond purchases. And a market in corrective mode will sink like a stone at the first hint of what it sees as bad news - the possible recovery of sanity in monetary policy.
Conclusion? Best guesses (as opposed to predictions) are permitted here. So for stocks, continued strength until a top is reached and the inevitable corrections comes - when, we just don't know. For gold, the continued correction got a shot of energy which should push the price down to whatever level it takes to shake out all those who bought anywhere near the latest highs of 2011; and when they all fall off, gold will commence its rise again - that is if you believe that gold remains in a long-term or "secular" bull market.
So the usual sleepy end of the year gets a wake up/shake up. Then again, it's been a rather unusual year, hasn't it?
Or so the "logic" goes.
So where do we go from here? Well, predicting usually never works out. But we can say that a stock market in a strong uptrend, as this market has been, typically reacts this way to the slightest hint of what it might consider good news - in this case the end of wondering whether the Fed will or won't do "x," i.e., taper its bond purchases. And a market in corrective mode will sink like a stone at the first hint of what it sees as bad news - the possible recovery of sanity in monetary policy.
Conclusion? Best guesses (as opposed to predictions) are permitted here. So for stocks, continued strength until a top is reached and the inevitable corrections comes - when, we just don't know. For gold, the continued correction got a shot of energy which should push the price down to whatever level it takes to shake out all those who bought anywhere near the latest highs of 2011; and when they all fall off, gold will commence its rise again - that is if you believe that gold remains in a long-term or "secular" bull market.
So the usual sleepy end of the year gets a wake up/shake up. Then again, it's been a rather unusual year, hasn't it?
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