We apologize for pointing out the inevitable, but gold is now breaking out and the usual LBMA gimmicks to slam it down are no longer working. Is the price suppression regime over? And that worthless atavism of a bygone era, stocks, continue to surge on increasingly bad news, confirming that all trading is now driven on expectations of what the Fed will do next Tuesday. If Morgan Stanley is right, expect gold to hit $1,350 in under 7 days. Additionally, should this occur, it will merely confirm that the double dip is accelerating at an uncontrollable pace, and that without the Fed's intervention the economy will tumble. Time to end all this "is there or isn't there" a double dip bullshit already.
And here is Nic Lenoir with his take on QE. We believe the catalyst was not some Goldman announcement as widely misrepresented by the WSJ blog, as this has been the case for a long time, but the MS expectation of QE next week.
The market is aggressively pricing up everything that is USD denominated today. This maket has the sweet scent of quantitative easing. Equities have reversed their overnight / early mornign weakness, US Treasuries are up, and the dollar index is getting pummeled, while gold is accordingly screaming higher.
A few things to point regarding the Dollar Index: the 61.8% and 76.4% retracement since the lows of August 6th are at 81.41 and 80.86 respectively, and the C=A from the local highs at 83.56 stands at 81.26. Therefore we have reached a patch of support here which will be crucial to determine the future direction for the USD. The acceleration lower today could be in part due to a short-term H&S pattern which neckline was sitting at 81.91.
GS is out today claiming the Fed will announce the next round of asset purchases in November, and there is the FOMC next week. So clearly people are getting ready for the free money bonanza. Tough luck for USDJPY which I was myself a proponent of buying as between the results of the Japanese election and the market pricing in Quantiative 2.0, we have expectations of tighter monetary conditions in Japan and looser conditions in the US being priced in. When it comes to the beggar's game, people expect the Fed to show absolutely no shame.
Let's watch the dollar index closely because it will hold the key to all markets... as always USD liquidity is key to the world and is the number 1 driver of all asset prices. Until next Tuesday however it seems premaure to pre-empt. Maybe someone knows something I don't!