Fed Gives Markets Heartburn
What were supposed to be benignminutes from the FOMC caused a meltdown in equities on Wednesday. In theinitial reaction to an overly dovish Fed, markets soared higher, pushing the Dow up almost 300 points. The jubilation for more free money was quickly met withfear and a market meltdown, with the Dow closing down almost 200
On the news, the dollar crumbled,and gold rallied along with the bonds before dramatically reversing along withequities. Gold continues to struggle and give ground as it looks to test the $1,300level. However, it would be no surprise to see gold rally from $1,324 today fora short-term bounce.
We expect a small bounce in goldbut expect the metal to stay under pressure until the $1,300 level is met. TheFed, which can't seem to get out of the way, will continue to cause heartburnin all markets because they are running out of tricks to manipulate rates. Thekey to watch is the dollar -- the Fed's last hope before losing total control.They will be the black swan.
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