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Gold & US Bond Will Be Biggest Gainer If FED Fails To Taper – Dec 18

December 18, 2013

Dec 11 -Gold 2014 Target  Break of $ 1000 for $ 800.

Let the Federal Reserve debate end and see what they have to offer through its monetary policy announcement. Market had tried to focus and discuss on all issues related to jobs, growth, price stability, forward guidance, etc. Interestingly inflation, which is off target is the new topic and last hope that is being highlighted/focused by the Doves to come to their rescue, as they are well aware of the price of taper.
Although I am not sure about the risks, as nothing has hindered the US economic activity. But the last word will come from FED that will matter. Whatever decision FED takes, market is now prepared for move that could be delayed by another 3-months if no announcement is made today. If announced, it is the size that would matter.
The Maths is simple that if FED goes for taper then the size would initially play key role in moving the market. Though small size may not have sever immediate impact, but it ultimately it will lead to strong USD on believe that finally the move has occurred. No tapering would mean USD thrashing and boon for US Bond, EURO, GBP and Oil too could initially benefit, But Gold will take a big stride and could make $ 100-150 gain by year end. If FED give a future time period for tapering, initially USD may make tiny gain before market will start selling US Dollar and US Bond yield will tighten and Gold will glitter.
Meanwhile, prior to monetary policy announcement it is difficult to determine market direction, but lot will depend on the mood of market and hence, market will tilt accordingly. Ahead of policy announcement, German IFO will be released and some important announcement is due from UK too and ahead of FOMC decision US economic data’s will be released.
GMT 3:07 – GOLD @ $ 1233 = Fate of gold’s next direction will largely depend on Fed’s decision. The levels on the upside to watch on break of $ 1260 will be $ 1290, if surrenders a could see gold entering $ 1325-50 band. On the down side a fall below $ 1190 will challenge new lows.

GMT 3:17 – EURO @ 1.3770 = Prior to FOMC announcement, Euro is likely to hold around 1.3740-50, with minor possibility to test 1.3800-10 zones, any fall should hold above 1.3710. But later breakout of either 1.3660 on downside and 1.3880 on the up would matter most (Please refer weekly Outlook).
GMT 3:23 – GBP @ 1.6281 = Choppy day for GBP. Break of 1.6370-80 levels is required for another upside test. On dip protection is at 1.6180, if fails 1.5990 could be a possibility this week.
GMT 3:33 – JPY @ 102.98 = Unless 103.70-80 surrenders, Japanese currency could potentially make gains. Break of 102.10 will encourage for sharper gains as it could penetrate 102.10 levels for a test and possible break of 100.50.
GMT 3:36 AUD @ 0.8911 = Any up move will require to break 0.8990-00 for 0.9050. However, selling interest will be seen on Aussie gains. Break of 0.8820-40 zones could see fall extending towards 0.8770.

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