Flying in stealth formation with other facets of the FOMC minutes from October's meeting, appeared a few lines that should be at least intriguing to gold investors. They may sketch out Ben Bernanke's parting gift to the economy and perhaps to those who are hoping gold will price higher in the months to come.

It has been no secret that for over a decade Chairman Bernanke favors direct and powerful intervention when the economy seems to be faltering due to issues with credit and cash liquidity.

It is now rippling through the FOMC minutes that, whenever tapering of QE3 finally occurs, there will be a different buying program aimed at shorter term Treasury issues, 3-month bills, for instance.

The apparent interest in this is not just to help keep market interest rates low, but to act as a backstop to statements regularly issued by the Fed stating that interest rates will remain near zero for x-amount of time at least. Evidently, the financial community doesn't always have faith in those statements. The buying of short-term T-notes essentially puts the Fed's money where its mouth is, so to speak.

The FOMC also reviewed other possible options, including a cut to the interest paid on excess reserves held at the Fed and/or lowering the unemployment rate threshold of 6.5%. The former would push banks to get that reserved money out into the hands of businesses and consumers.

We're assuming that any of the three scenarios will take a lot of negotiating. However, the backstop horizon interpretation of any of the possible game plays is a strong one. A new, more modest action would also allow the Fed to actually taper and begin its exit strategy altogether from QE3 without roiling market waters too badly.

Much is contingent on how the elected government faces the challenges on fiscal responsibility and budgetary policy-making. If they don't deal adequately with the issues confronting an advanced, highly technologized, 21st-century economy, the Fed plus all the tea in China won't help the U.S. or the rest of the developed world.

While Bernanke's ideas and executions have come under some fire, they seem to be proving correct on most levels. And if the Fed can figure out how to exit patiently and smoothly from all the QE, Ben will be regarded highly by history.

Although we think of many people in exalted positions as technocrats or even automatons, they do consider how history will view them. Watch for his legacy moves, even if they are channeled through presumed new chairwoman Janet Yellen.

Let's hope these back-stopping ideas area good ones that can be executed fairly. And let's hope the Senators and Congressional delegates in Washington can figure out a good, sensible budget that works for citizens and businesses.

Wishing you as always, good trading, 

Gary S. Wagner- Executive Producer

Market Forecast:

This week we were looking for lower prices and beginning Monday we suggested entering short positions in both gold and silver. The early birds did get the worm, but so did those subscribers that waited for our trade alert on Wednesday. We said:  "All Traders should be short." 

We still see no real reason to change that outlook. However, one thing has changed on a technical basis. We identified a primary support level in gold at 1235. Yesterday we hit that as gold prices touched an intraday low of 1235. Let us see if any real support for prices occurs at this level. We should get some indication whether gold prices stabilize or head lower in first part of next week. But for now we should maintain our current short positions. 

Proper Action

Maintain Gold Short at 1276  stop @ 1294
Maintain Short silver @ 20.47 stop @ 20.90

We will look to tighten stops on both gold and silver first part of next week or simply take profits *

* strategy will be discussed on todays video

COT LINK  See previous weeks in Historical Commitments of Traders Reports.

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