Tuesday, April 3, 2012

March Fed Minutes

The Fed minutes from the last meeting were released today, and there was little surprise in the text.  However the market "reacted", or that is what people are led to believe.  The market was sold off, but was the minutes release only a front for the selloff?  And what are the implications?

First, technically there is usually a break before a large move.  Precious metals were moving up, the dollar was moving down, but the trends reversed dramatically.  Does this mean that there will be a trend reversal, or is this a break that is a last move before the recent trend continues?

As PMs have been in a ten year upward trend, and the dollar has been losing to inflation for its whole existence, I do not see a trend reversal.  The breakdown today allows the market to use this break and reinvest.  What I mean is, right now, the dollar can be used to buy precious metals.  And this is what will be done sooner than later.

The readjustment will be slow.  I think PMs will experience a long April.  I do see the PM complex moving up, gold finishing the month off at $1750 and silver at $36.

In conclusion, the market did not react to the Fed minutes the way people think.  The minutes were not news; everyone knew that the minutes did not implement another new QE.  What happened was that all trends are in line, nothing happened, but the market players wanted to refresh their positions.

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