Zeev's Turnips Patch-No Politics (ZEEV)

[mlsoft]

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I see no reason for a 25 basis point cut in rates to cause that kind of selloff in gold although it is likely that any selling at all would get "goosed" by the powers that be in gold. I think the rally in the $USD already points to only a .25 cut and the $USD rally is one reason for the weakness in gold several times last week.

If the Fed cuts 25 basis points, my read is that the $USD will weaken again and drift down - but should they cut a full 50 basis points, the $USD will tank unless they support it as it drops, which is likely. The danger to gold is that should the Fed stand pat and not cut at all, the $USD would have a decent short term rally and the $328-330 area could be in play. I do not expect that to happen, though, because the bond and equity markets are both expecting a cut and would probably tank if no cut was forthcoming. The Fed wants a lower $USD (as long as the drop is orderly), but cannot afford to have the equity or bond markets to be hit with big selling so I think we will get a cut, probably 25 basis points. Gold should do ok with that although da boyz might play a bit with it for a short while should the Treasury support the $USD.

Just my opinion, though.

mlsoft