Stocks Fly, Oil Rallies, Gold Flounders

This just in!

Instead of printing over a trillion dollars within stimulus per year, the Federal Book announced on Thursday that it will print only $900 billion.

Whew.

We dodged a bullet there. For a while I thought the stimulus printing was getting out of hand, but now with this ‘huge’ cutback, looks like our future is inflation free!

[Squinting and turning my personal head back and forth] Errrr, maybe we ought to take a look at what yesterday’s Fed announcement REALLY means…

First up let’s take a step back.

Had you asked if the Fed would announce its official tapering plan in 2013, your editor’s answer would have been ‘no’.

It didn’t seem like the time nor place to make an official announcement.

Ah, but that crazy-bastard Bernanke usually tosses a good screwball. Happy holidays marketplace watchers!

With a quick announcement the top of the Fed, in what could be one of his last actions because chairman, gave a concrete cutback on stimulus spending. Heading forward (starting in January), the actual Fed will purchase $75 billion in bonds per month, instead of the previous $85 billion. (Particularly, the Fed will purchase $5 billion less per month of both mortgage backed securities and treasuries.)

I guess old Ben was sick of hearing the actual catchy phrase from the speaking heads ‘over a trillion bucks of stimulus per year’.

At any rate, after yesterday’s statement we’ve backed off of which 13-digit per year print fest. Arrive January we’re back down to a comfortable 12-digit per year print fest (that’s a ‘9’ followed by 11 ‘0’s.)

The markets rejoiced. After the 2pm announcement shares represented by the Dow Jones were upward a combined 292 points (1.84%). Oil and many commodities followed suit. The way the number-crunchers saw it, less stimulus meant the market had been indeed strengthening. A stronger marketplace means higher stocks, more burnt crude, more iPads, more grilled tacos, and so forth.

But there is a dunce in the corner…

After the Given announcement, gold traders going to the exits. Not inside a big way, but in orderly fashion – this is a civilized team, mind you. However, it’s all hands on deck – we’ll want to maintain tallying up daily moves in gold. We’re continuing to see where the market likes to buy and sell – and over time, as it always happens, we’ll get a read on the metal’s next mid-term direction.

That said, my outlook remains unchanged at the moment. Gold remains under pressure and needs to find a degree of support before re-establishing an upward trend. So far we can’t appear to hold support at $1,Two hundred and fifty. However, looking at a 30-day graph, as well as the 6-month chart, there seems modest support at $1,200. Will it hold? We’ll see! One thing that’s certain, although, is that this marks the next important collection in the sand for gold. Stay tuned to price action.

However let’s connect some more dots.

The Fed announces the infamous taper and gold remains somewhat range-bound. As of typing this particular note the metal hasn’capital t plummeted through $1,200; that’utes a telling sign in itself. Especially if you’re a long-term owner of the Midas metal.

I still like long-term gold. If anything the Fed’utes taper announcement gave us a look behind the drape. We moved from a small over a trillion per year in stimulus to a little under a trillion per year in stimulus. Indeed, you don’t quit this kind of monetary meth cold-turkey.

That said, we’ve entered the next stage of the monetary shell game. How much will the next blend amount be? When will the following taper announcement be? What about interest rates?

There’s a lot of uncertainty ahead in 2014.

But one thing is perfect for sure. Stimulus is going to be with us for a while – and that means rising cost of living can’t be far at the rear of. Truly, the US government – particularly the Given – can only print so much money and sell so many low-interest homes prior to we’ve all go to pay the monetary piper.

Will that inflation strike in 2014 or in 2024? Your guess is as good as mine.

But rest assured that the Midas metal – with regard to ‘buy and hold’ investors – will remain a store for wealth for many years. When we see an opportunity to ‘buy the dips’ or play the downside from a trading standpoint, we’ll keep you posted.

In the meantime let’s give a hearty hurrah for Ben Bernanke. He finally drawn back the curtain – and the casino looks about the same on the inside.

Keep your boots muddy,

Matt Insley
Contributing Publisher, Money Morning

Ed Note: Stock Fly, Oil Rallies, Gold Flounders originally appeared in Daily Resource Hunter, USA.