I wonder how much blood letting will happen by Friday.
Fed Keeps $85 Billion Pace of Bond Buying, Sees Risks Waning......
The Federal Reserve will keep buying bonds at a pace of $85 billion a month and said that risks to the economy have decreased.
“The committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall,” the Federal Open Market Committee (TREFQE2) said today at the conclusion of a two-day meeting in Washington. It repeated that it’s prepared to increase or reduce the pace of purchases depending on the outlook for the job market and inflation.
Chairman Ben S. Bernanke is expanding the Fed’s balance sheet toward $4 trillion as he seeks to reduce a jobless rate that stands at 7.6 percent after four years of economic growth. Concern that the Fed is closer to reducing the pace of asset purchases pushed 10-year Treasury yields to a 14-month high.
Stocks extended losses after the statement. The Standard & Poor’s 500 Index declined 0.3 percent at 2:36 p.m. in New York. The yield on the 10-year Treasury note rose to 2.27 percent from 2.19 percent late yesterday.
“The lessening of downside risks tilts the FOMC toward the possibility of making an announcement on potentially tapering QE later this year,” said Sam Bullard, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina.
The Fed also left unchanged its statement that it plans to hold its target interest rate near zero as long as unemployment remains above 6.5 percent and the outlook for inflation doesn’t exceed 2.5 percent.
Stocks Tumble With Bonds as Gold Slides in Global Rout,
Stocks tumbled, with the benchmark index of global equities sinking the most in 19 months, and bonds fell around the world after the Federal Reserve said it may phase out stimulus and China’s cash crunch worsened. Gold led commodities lower as the dollar rallied for a second day.
The MSCI All-Country World Index (MXWO) lost 3 percent, the most since November 2011, and the Standard & Poor’s 500 Index sank 1.6 percent at 1:17 p.m. in New York to extend its biggest two-day drop of the year. Ten-year Treasury note yields rose nine basis points to 2.44 percent, the highest since August 2011, as rates surged from New Zealand to Germany. Emerging-market assets fell with India’s rupee and Turkey’s lira touching record lows. The S&P GSCI gauge of raw materials slid 2.8 percent, the most since September, as gold sank below $1,300 an ounce for the first time since 2010.
Chairman Ben S. Bernanke said the Fed may start reducing bond purchases that have fueled gains in markets globally, and end the program in 2014 should risks to the U.S. economy abate. Data from China, the biggest developing-nation economy, indicated manufacturing shrank at a faster pace and the benchmark money-market rate climbed to a record.
“It’s a knee-jerk downward reaction because everyone is afraid that if you’re taking the punch bowl away that must be bad for markets,” Philip Orlando, the New York-based chief equity strategist at Federated Investors, which has about $380 billion in assets under management, said by telephone. “The market is choosing to ignore the good news embedded in the Fed’s comments. All it’s looking at is the reduction of the accommodation.”
Someone else agrees with you.From the comment section of this article:
"2 :hours ago
Actually this is very normal when wars end. When volatility comes out of the market place, gold usually sells off. Gold should be at 50 times the price of silver and ten times the price of oil historically, so currently with silver at $19 and oil at $100, gold should be at $ 1,000 or even lower. "
Gold Slips to 34-Month Low as Precious Metals Slide on Fed View
Gold plunged to a 34-month low, set for a record quarterly drop, as improving U.S. economic data strengthened the case for the Federal Reserve to reduce stimulus. Silver fell to the lowest since August 2010, platinum the cheapest since 2009 and palladium the lowest since November.
Gold dropped 23 percent this quarter, heading for its biggest loss since at least 1920 in London. Fed Chairman Ben S. Bernanke said last week the central bank may slow its asset-purchase program this year if the economy continues to improve. U.S. durable-goods orders rose more than expected, home sales advanced to the highest in almost five years and consumer confidence climbed, data showed yesterday.
Gold rose on Tuesday as comments from China calmed concerns about a credit crunch there, taking pressure off commodities and equities, but the prospect of an end to U.S. Federal Reserve easing kept bullion near three-year lows.
The metal was caught up in selling on the wider financial markets earlier as Chinese shares fell deeper into bear market territory on fears of a cash crunch, dragging down other stock markets, oil and metals.
Commodities recovered in Europe and shares rose more than 1 percent after China's central bank said on Tuesday it would guide rates to reasonable levels.
Gold remains on track for its biggest quarterly loss in more than 30 years after the Fed gave the clearest signal yet that it plans to taper its $85 billion monthly bond-buying programme.
Spot gold was up 0.3 percent at $1,284.66 an ounce at 0944 GMT, off an earlier low of $1,273.46, although it continued to underperform other precious metals, oil and copper.
"Bullion showed little reaction to firmer equities and other commodities, including platinum group metals and silver, after the People's Bank of China tried to once more calm the market on liquidity concerns," VTB Capital analyst Andrey Kryuchenkov said.
"We are sitting tight, consolidating ahead of U.S. data in very thin trading," he said. "People will give extra weight to any U.S. macro or QE3 related comments."
The Fed's quantitative easing measures, put in place to stimulate growth, have helped drive gold to record highs in recent years by keeping interest rates low while stoking inflation fears. Reducing those measures will likely hurt gold.
Investor appetite for bullion has faded, with the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, reporting another 4.2 tonne outflow on Monday.
BANKS CUT FORECASTS
A raft of banks, including Goldman Sachs, Morgan Stanley, Credit Suisse, Deutsche Bank and HSBC have cut their gold forecasts this week after its slide.
Credit Suisse cut its gold price forecast for 2013 to $1,400 an ounce from $1,580 an ounce, while HSBC cut its price view this year to $1,396 an ounce from $1,542 and Morgan Stanley reduced its 2013 forecast to $1,313 from $1,409.
"With investor demand for safe-haven assets waning against the backdrop of a strengthening U.S. dollar and rising U.S. bond yields, market conditions for gold and silver have become markedly less favourable," Morgan Stanley said in a report.
"Our price profile for these two metals now acknowledges that the annual average peak in the price for these two metals was achieved in 2012 with minimal prospect for recovery."
U.S. gold futures for August delivery were up $7.20 an ounce at $1,284.30.
Silver was up 0.5 percent at $19.75 an ounce. Spot platinum was up 1.5 percent at $1,348.49 an ounce, while spot palladium was up 1.8 percent at $671 an ounce.
South Africa's Association of Mineworkers and Construction Union (AMCU), which has emerged as the dominant union on the platinum belt after a vicious turf war with the rival National Union of Miners last year, wants gold producers to more than double the wages of entry-level miners, according to a document submitted to the companies. (Editing by James Jukwey)