Japan To Gold: BOO!

Gold hit a four-year low today after Japan unexpectedly greatly expanded its monetary stimulus program that in the United States was called quantitative easing. The U.S. Federal Reserve just Wednesday ended its program. We don't think it's coincidence, which is fine. Let Japan assume its proper role in the world economic arena.

The move itself was surprising. The scope of the expansion was shocking:

The Bank of Japan said it would increase its asset buying program to 80 trillion yen ($726 billion) a year, up from the previous bond/asset purchase level of 60 to 70 trillion yen.

To put the Japanese buying surge in perspective, the U.S. economy is more than twice the size of Japan's. At its height, the Fed's QE3 buying was $85 billion per month or slightly over $1 trillion per year. That makes Japan's commitment about 70% of the U.S. level, about 20% more than the size of economy ratio.

The Nikkei stock index was up around 5% on the day.

This sent the dollar soaring and gold diving. Gold was already in a tailspin.

Earlier this week, as our daily subscribers had read, the FOMC meeting news release and related statements projected a more hawkish stance - at least it was interpreted that way.

Yesterday, U.S. government figures said that the American economy had grown at a yearly rate of 3.5% in the third quarter. It seems to be heating up. That was the latest data point in a series of rosy news from the world's biggest economic beast.

As you might expect, the equities have gone ballistic with all this news. The Dow and S&P are up just under 1%, while the NASDAQ is up slightly more than 1%.

Crude oil keeps plummeting, too. We expect it to now go below $80 per barrel and remain in trading tandem with gold (and silver). Silver, in fact, has lost more this year than gold, never seeming to get any bounces up on good news and taking all the knuckle sandwiches it can handle when news goes against it. Silver has lost 20% on the year.

What will it take now for gold to stop falling? Literally, a monumental breakdown in world affairs.

Have an enjoyable weekend.

Wishing you as always, good trading,