Any and all of us geeks that have watched the markets over the past 2 or 3 years have seen something rather remarkable; the complete reversal with regard to the thought process and status of Gold and Silver. These two precious commodities were, and still are, considered safeguard investments, a safeguard against rising inflation but don't say that out loud or you're the nut.
The FED, along with the god's of money on Wall Street, have been working overtime to re-categorize the status of gold and silver from a safe haven investment to shiny relic. If you follow the so-called news with regard to gold and silver you will quickly realize that the mainstream money media is involved in the conspiracy to deflate the value of gold. It is truly a fool's errand, it will never work.
Now we wait and see if the UN, World Bank and or the IMF step up the pressure on the U.S to allow other countries to repatriate their gold reserves. When this happens I will speculate gold shooting back up to $1800 an ounce virtually overnight and when the world realizes that this gold simply doesn't exist, I would not be shocked if Gold settles at $3500 an ounce and Silver hits, easily, $100 to $200 an ounce. They so desperately want gold and silver to deflate along with the taper in QE, they will do everything and anything in their power to make it happen.
Now to the original topic. Speculation is running rampant that the FED will announce yet another taper during its end of the month meeting to $65 billion a month.
I am not so sure this will happen, this may be one of those Bernanke tests to judge the reaction of the markets. And how did the markets react? In the short term they reacted negatively, the DOW plunged over 100 points in seconds. Bernanke is a smart man and I am sure he is watching the markets, closely.
It is no secret that the rise in the Dow and the S&P 500 closely correlate with the increase percentage of the FED's balance sheet in any one year since QE began. Proof that QE is responsible for market performance. I cannot fathom that the FED will be able to stop QE all-together in 2014 for one big reason. That reason being the fact that the markets have not experienced a major, and natural, correction in some years. Further proof that QE and not the natural strength of the economy is responsible for the record setting pace of the world's markets over the past two years. At any time and for any reason the markets should experience a 10% or so correction, this has not happened and I believe Bernanke is shaking the apple tree to see if the low hanging fruit falls and thus the correction that everyone is expecting.
So we wait and see if the typical 4% correction occurs because of this new taper rumor like in times past. The markets opened flat but did not tank starting in 2014 on the news of the first round of taper from $85 billion to $75 billion, so the FED is clearly throttling this to the edge to see how far they can push it. With the negative Q4 numbers from China and the fact that their GDP is still stagnant it is amazing that the markets continue to rise but all this speculative recovery chatter must be confirmed in the court of public opinion. However, 99% of public has no idea how the NEW economy works, so as long as CNBC says its OK it must be OK.