The Inevitable. But When?

In the 1987 film classic, Moonstruck, a character says to her philandering husband:

"I just want you to know no matter what you do, you're gonna die, just like everybody else."

 We are all going to face the fallout from the Fed's statement tomorrow after the conclusion of the current FOMC meeting. We can't make the news. We can only sift through it and bounce it over to technical analysis. But we have to stay aware.

Gold was under pressure today because of the uncertainty surrounding the Fed's outlook. Money trotted to the sideline to await news of tapering of QE3.

"We suspect that directional money has started to gravitate to the sidelines ahead of the Fed policy statement and that conditions will remain quiet," Edward Meir, an analyst with INTL FCStone, said in a note.

We think that precious metals traders have been unduly jittery about it recently. Other factors exist in the marketplace, of course.

Barclays said in an advisory note that commodity investments are heading for record outflows in this disappointing year, driven by withdrawals from gold exchange-traded funds (ETFs). Commodities have been the most horribly-performing asset class this year, with the Dow Jones-UBS Commodity Index down 9.5% year-to-date while the S&P 500 stock index is up around 25%.

The consumer price index in November was essentially flat and up only 1.2% year over year. This is a key problem and, while many analysts are looking closely at unemployment figures, "growth" stats and producers' sentiment, the CPI tells you almost all you need to know about the U.S. and other developed economies. If you don't have at least 2% inflation, it means your economy is flat, flat, flat.

It means that employment is stagnant, wages are stagnant and faith in the future is as firm as  Jell-O.

Regardless of where you come down on interpretations of such data and feelings, it is not terrific for gold.

Keep a close eye on the press release from the FOMC in Washington tomorrow. But, even though we think that at best there will be a forward-looking statement, it seems very little will be seen as favorable to gold as it stands right now. The only positive news out there is that the stock markets seem to have lost some steam. This does precious metals traders no good if the freed-up money has been put in cash instruments for the nonce.

As always, wishing you good trading,