Accelerating Sell Off In Commodities Shows Why Fed's Hands Are Now Tied
As Mark Fisher summarized market psychology so well earlier: "parabolic up - parabolic down." The problem for the Fed now is that to kill gold, it will also have to kill stocks, which are trading lower as gold and silver get flushed. As we presented over a month ago, gold and silver are both higher beta short hedges to stocks. As stocks go up, PMs go up more, and vice versa. Alas, silver and gold here are unsustainable for the Fed, which means Bernanke has once again managed to box himself in a corner, as any gold selloff will also presuppose a stock dump. All Bernanke can then hope is that gold does not rebound. It worked last time around... for about 5 days. Then more than caught up. This time the half life, like every repeated CB intervention, will be that much shorter.