Contrary to nearly everyone’s expectations, the Federal Reserve Open Market Committee did NOT taper their $85 billion a month quantitative easing program (and I had a “Dropping F(ed) Bomb” headline all planned out.) Gold, silver and palladium promptly grabbed their jetpacks and headed to the stratosphere.
At this time, gold is up $52.80 (+4%) to $1,362.80, off the day’s low of $1,295.60. Silver is up over 6.5% to $23.17, and palladium is up 1.85% to $716. Platinum didn’t catch much of a ride on this afternoon’s euphoria, only gaining $8.00. This is probably because palladium is used more in gasoline-power automobiles, whereas platinum is used more is diesel-powered vehicles. Since the U.S. (and China) have mainly gas cars, palladium jumped with gold and silver.
The dollar is feeling the pain of continued money printing as possible devaluation, with the DXY dollar index promptly nose-diving down through the 81 mark to 80.20 before recovering flat. 10-year Treasuries made a huge rebound, with the yield dropping to 2.70%.
The dollar dropping like a shot duck boosted the euro up past the $1.35 mark and the sterling over $1.61. The dollar did, however, gain 1% against the yen, to just under 98 yen to the dollar.
Wall St. also went vertical on the news, with the Dow and S&P 500 both breaking new highs.
Feed Chairman Ben Bernanke cited weak improvement in employment as the reason to hold off on tapering stimulus measures. While this was considered a big factor by analysts, they only considered it would lessen, not cancel, the expected taper.
Peter Schiff was quoted this afternoon as saying “The Fed’s inaction should be perceived by many as an admission that the economy is fundamentally weak.” He believes that the housing and stock markets are vitally dependent on the Fed’s stimulus, and would collapse without it. Schiff expects the economy to not be able to truly recover until stimulus is taken away, which will mean a market correction perhaps deeper than that of 2008 before the economy can stand own its own two feet.
We might see this euphoria carry over into the Asian markets tonight (despite the Indian government’s attempts to strangle domestic gold demand) and in Europe.