The Fed is in full market control mode after its tentative interest rates future increase announcement. It constantly keeps the stock market from properly correcting, in the hope it will keep going until the next Fed announcement. It must be said that the stock market reaction to the Fed’s speech is followed and analysed almost as much as the speech itself.
Normally, the stock market should have corrected. Eventually it will, but the Fed is doing all it can to keep this bubble-like market from reversing, because doing so entertains the feeling of wealth for Americans who have invested their pension funds and savings in it.
Gold has become the Fed’s “punching-ball barometer”, just another parameter needing to be controlled. For the Fed, it is crucial to be able to raise interest rates without creating panic on the stock market in order to have some ammunition left when it turns bearish; but I am not sure it will be able to achieve that, because its actions come late into the bull market cycle. We are actually at the threshold of implosion! Normally, if it hadn’t been for all those QEs to taper, it could have raised interest rates already and could have used the weapon of lowering them in case of panic on the stock market.
I think this is the longest and most elaborate market control operation by the Fed since its creation, and this is why I’m anticipating the utmost chaos in the stock market going into 2015. But we can see that, since the beginning of this year, the timely interventions to control the price of gold are having less and less effect and that gold is often in backwardation, a sign of physical gold shortage.
Silver practically didn’t bulge today, and HUI miners didn’t even replicate the metal’s surge with the usual two-for-one leverage. This relative strength bodes well for the future, but one must wait and see if the flash attacks persist until tomorrow...