English: A picture from the gold vault of the ...

The Federal Open Market Committee (FOMC) meeting minutes from January 29 -30 were released yesterday afternoon. Within the Federal Reserve System, the FOMC is responsible for making key decisions about money supply and interest rates.

One paragraph in the minutes spooked gold and silver bulls, as well as stock and bond bulls. Here is the paragraph that caused concern:

“However, many participants also expressed some concerns about potential costs and risks arising from further asset purchases. Several participants discussed the possible complications that additional purchases could cause for the eventual withdrawal of policy accommodation, a few mentioned the prospect of inflationary risks, and some noted that further asset purchases could foster market behavior that could undermine financial stability. Several participants noted that a very large portfolio of long-duration assets would, under certain circumstances, expose the Federal Reserve to significant capital losses when these holdings were unwound, but others pointed to offsetting factors and one noted that losses would not impede the effective operation of monetary policy. A few also raised concerns about the potential effects of further asset purchases on the functioning of particular financial markets, although a couple of other participants noted that there had been little evidence to date of such effects. In light of this discussion, the staff was asked for additional analysis ahead of future meetings to support the Committee’s continuing assessment of the asset purchase program.”

Gold and silver fell out of bed

Gold and silver bulls have been assuming that QE will last forever. Further, the assumption by the momo crowd that QE3 is inflationary has been proven erroneous as fully explained here.

The momo crowd was disheartened in that there is a discussion in the Federal Reserve about ending QE.

As shown on the updated chart, gold fell through the major support. The major support zone on gold ETF  GLD was at $153 – $156. Next there is a minor support at $145 – $146.

Please click here for the chart.

Support in silver ETF  SLV  $27.80 to $28.00 was broken. Also broken was the support in gold miner GDX  at $38.00 – $38.20.

Our response was fourfold. We were correctly positioned as described in “gold is at a critical juncture ”. First, we took profits on our short position in silver miner Silver Wheaten  SLW by exiting the last tranche at $32.22; our highest short was from $41.00…Read more at MarketWatch


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