Gold experienced a sell order just before the New York open that was so large that it tripped breakers on the CME exchange, which halted trading for 20 seconds. The takedown fulfilled its intent by triggering sell stops and pushing gold to a five-week low ahead of this afternoon’s release of the minutes from the October FOMC policy meeting.
Gold’s drop was not reflected in the dollar, which remained lower from overnight. The greenback still hasn’t really recovered from touching a two-week low in the wake of Chicago Fed President Charles Evans imploring banks to lend more instead of keeping the excess cash reserves they have received from the Fed’s bond-buying program locked up. “I’d like you to do a lot more lending than is taking place now,” he told the audience of bankers, who expressed worry of runaway inflation once the trillions of dollars in excess cash being held by the banks hits the market.
In other currency news, the euro hit a four-YEAR high versus the yen on talk from an ECB official that using negative interest rates to boost spending was something the central bank would rather not do, but it was still on the table.
The big news today is the release of the FOMC October meeting minutes, which analysts will frantically scan for clues to when tapering of the $85 billion a month of purchases in Treasury bond and mortgage-backed securities will begin.
Other major U.S. economic today was the Consumer Price Index, which dropper 0.1%, fueled by a 2.9% drop in gasoline (Curiously enough, I noticed that gas had increased 22 cents a gallon this morning on the way to work.) Retail sales in October were up 0.4%, against expectations of 0.1%. This is welcome news to a retail sector that is panicking over the holiday season, with many chains opening on Thanksgiving Day. The National Association of Realtors announced that existing home sales in October dropped 3.2%, after falling 1.9% in September.
Outgoing Fed Chairman Ben Bernanke last night added his voice to the common message that other Fed officials have been singing since Janet Yellen’s confirmation hearing before the Senate- Zero Interest Rate Policy will remain in place long after the Fed stops its bond-buying program. This is in line with two major reports from top Fed economists being presented at an IMF conference.
They call for a concerted effort to get the market to realize that just because the Fed is stopping its $85 billion a month in bond purchases, that zero interest rates will continue. In fact, they call for zero interest rates even after inflation rises above 2%, if unemployment is still above 6%. As one noted analyst remarked this morning, perhaps they Fed should ask the Japanese how that works, since it led to 20 years of stagflation there.