By A Thousand Cuts

Gold swam in waters inhabited by creatures taking a nip here and a bite there. No one factor is holding overwhelming sway. Most of us watching the precious metals think that tomorrow and Wednesday's FOMC meeting has traders and investors back on their heels without much real reason.

What might the worst outcome be? We are reasonably certain that the Fed will end QE3 in the final act of tapering. But, if it doesn't, so what? The once huge $85-billion-per-month buying program has been shrinking for almost a year. Perhaps there is a psychological factor, one that would lead many to conclude that if QE ends, then a rise in interest rates can't be far behind.

The dollar was down today, pushing gold up on that end of the equation, but traders had different ideas, fleeing to the sidelines. So gold looks to move lower by about 4.80 through late afternoon trading.

A trickier question is this: will the Fed take into account the sludgy, stuffy feeling in Europe and the slowdown in China? That is to say, will the Fed hint at maintaing rock-bottom interest rates longer than the predicted mid-year rise (in 2015)? After all, the Fed's mandate is to keep growth moving in the U.S., keep unemployment low, and make sure inflation is tame. The mandate isn't to keep the other guys' economies afloat. Or is it?

If, for instance, two other major economies - hint, hint: Europe and China - are slow or slipping into recession, that eventually must effect the United States and closely affiliated economic partners like Canada and Mexico. By keeping rates low, the Fed can send a signal that it's thinking globally, not simply nationally.

Everyone is connected now. To underscore this point, today Germany's major business sentiment index hit its lowest level in two years. That, in turn affected almost all the major world bourses, as equities gave back some of their big gains from last week. However, the equities like many other markets, are seeking fresh inputs.

U.S pending home sales rose 0.3%, less than expected and pointed out that there is still sponginess in some sectors of the American economy. That helped gold, but not enough, as noted above.

Oil prices, which have been declining for weeks now, are trading back and forth today between gain and pain, currently, at 4:45 EDT down about 30 cents per barrel.

Bond yields are also down, indicating that little money is seeking haven there.

The one conclusion we may draw from all this slight movement up and slight movement down for the day is that it's all about the Fed. But it's also all about Europe and China. Will the Fed send a clear signal? And, if they do, will that signal let those two other big economies off the hook, or will the Fed take the hickory stick to them and essentially indicate that it's about danged time Europe and China started stimulating strongly so the U.S. can get back to normal monetary policy?

Yes, indeed, a thousand cuts.

Wishing you as always, good trading,