The Fed’s Minutes Scare the Market

The broadly expected sell-off may finally be happening. The S&P 500 fell 19 points yesterday and it’s down another 7.5 points today. The index may even drop below 1,500 very soon.

What had investors in a bad mood is possibly signals from the recent Fed minutes that the central bank is considering pulling back on its Quantitative Easing policy. Personally, I think folks are using this rather tame bit of news as an excuse to exit some positions. The markets have risen quite rapidly so I understand the temptation.

The odd part is that what the Fed really said is that the economy is improving and because of that, it may downshift on the amount of their bond purchases. So the market is down on somewhat optimistic economic news.

Perhaps the Gold market had suspected this news was going to happen because the price of the precious metal had been pulling back. If the Fed takes its foot off the pedal, that means real interest rates would rise and gold would take a tumble. Gold fell for five days in a row and it plunged $40 per ounce on Wednesday.

At its high in September 2011, gold got to $1,923 per ounce. Today, it’s down to $1,579 per ounce. Gold is also close to a death cross which is when the 50-day moving average falls below the 200-day moving average.

Posted by on February 21st, 2013 at 11:05 am

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