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Gold started off the day in New York by falling about $20. By mid-afternoon it was up about $2.50. As the trading day winds down (4:15 PM New York time), gold is now off about $2.00. Traders are playing a game we all know and love. It's called "Fear The Fed." There is no real rhyme or reason to it, no real rules. Just mash in every possible worry about what the Fed maybe-might-could-be-suspected-of-doing with some denial that gold has a meaningful place in an investment portfolio. Stir in a lot of negative talk from the big dog on Wall Street, Goldman Sachs, set the blender to high and you come out with a frothy mess.

The Fed kept its $85-billion-per-month bond-buying program in place, and described economic growth as "modest" for the first time in at least three years. The Federal Open Market Committee had previously described growth as "moderate." To our way of thinking moderate and modest mean pretty much the same thing. Indeed, modest seems to tip slightly lower on the scale than moderate. We think it could be described as "lightly moderate."

"The Fed didn't say anything new, tapering is still on the table," said Dave Meger, director of metals trading at Vision Financial Markets LLC.  But here is another county checking in with returns:

"[Through] some subtle changes in the format of the ensuing policy statement and on balance it appears that the central bank has edged ever so slightly away from reducing bond purchases," says Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. "The sense that easy money is here to stay will likely permeate investor sentiment." 

That's a killer of a statement by Mr. Meger. "Nothing new" now means "will taper." Even if the jobs report issued by private surveyor ADP is accurate at 200,000 new positions in July, the unemployment needle will only move from 7.6 to 7.5%. We shall see what the U.S. Department of Labor says on Friday. 

If the unemployment rate goes down at the current pace, we would reach 5.5% - a decent level - in March of 2015. 

Steven Russolillo's column in The Wall Street Journal this afternoon carried the headline: "Maybe Fed Won't Start Tapering in September." Food for thought.

One wildcat item that should begin to come onto our radar as gold bulls is the 2014 election. What politician in his or her right mind would do anything to cause the economy to slow down (as it did during the sequestration controversy)? Many radicals on the right wing of the Republican Party might. Theirs is not mainstream Republican thinking, which generally is sensible. But the centrists are being pulled hard right by people who sincerely believe we should have no government at all except for defense and a few basic emergency and civil engineering needs.

It's early, but come September we think there will be more talk of tapering, though nothing decisive. Look for some paring back come 2014, but not too much unless there is a blast of inflation and a distinctive uptick in employment. 

Wishing you as always good trading,