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FOMC meeting

It was an overall quieter trading affair Monday amid a lack of major economic data issued overseas

overnight, not much market reaction to some fresh U.S. economic data, and as traders and investors

are looking ahead to this week’s U.S. Federal Reserve’s Open Market Committee meeting. U.S.

economic data released Monday included industrial production and capacity utilization, pending home

sales and the Texas manufacturing outlook survey.

The FOMC meeting begins Tuesday and ends Wednesday at midday. The FOMC is expected to

leaving U.S. monetary policy unchanged, but as usual traders and investors will be looking for any

clues on the timing of changes in policy. Most in the market place believe the Fed will not start to cut

back on its monthly bond purchases until early next year—most likely the second quarter at the

earliest. This scenario favors the raw commodity market bulls, including the precious metals markets.

Any hints at this week’s FOMC meeting that the “tapering” of monetary policy could come sooner than

the second quarter of 2014 would likely be bearish for most markets.

Also, beginning in November the European Central Bank starts its stress tests on major financial

institutions in the EU. It’s believed that there are a lot of non-performing loans on the books of EU

banks, so the stress tests and any bad results could impact the market place. Such a situation would

likely be bullish for the safe-haven gold, and U.S. and German bond markets.

The U.S. dollar index was firmer Monday, on tepid short covering after hitting a 10.5-month low on

Friday. The firmer greenback did somewhat limit buying interest in gold and silver Monday. Meantime,

Nymex crude oil futures were firmer on short covering.

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