Gold got whacked down again yesterday, declining steadily from the far East clear through the New York session on Monday, and finishing at $871.10, down $20.80. Overnight, gold has fallen off.
Platinum was likewise savaged, with numerous rallies through the day met with determined selling, and the metal ending just off its intraday low at $1926/oz., down $49. Overnight, platinum has edged lower.

Silver took its lumps into the first hour of the New York morning session, then traded sideways for the balance of the day, closing at $16.56, down 43 cents. Overnight, silver is trending lower.
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A gloomy day for precious metals investors ahead of today’s interest rate announcement by the Federal Reserve, with gold down 2.3 and silver 2.5%.

The usual suspects lined up against gold, with the dollar firming and oil sliding in price, but that probably doesn’t explain the broad-based selloff. The selling resembled March’s washout of weak hands.

But there could be another factor in play. The market is behaving as if the Fed announcement will be gold-negative no matter what. This could indicate a belief that the Fed will stand pat, rather than lower rates yet again.

Or it could signal that the market believes that, if indeed another quarter point is lopped off, that will be the last such cut. Fundamentally, it makes little difference whether interest rates remain steady or drop a little more. In both cases, increased inflation is baked in the cake. Gold cannot long remain depressed.

Jim Sinclair, writing on jsmineset.com, has nailed it, in our opinion, saying that, “The following is what has pressured gold and caused short covering in the dollar/euro: Media has convinced the public that the Fed will go hawkish, first by decelerating the drop in interest rates. The deceleration has been attributed to the Fed having done the right thing.

“Media has convinced the public that the ECB will reduce interest rates now faster than the Fed, thereby boosting the dollar versus the euro. Although the business statistics are negative, the media has held out the carrot that it takes six months for the Fed’s action to materialize in the economy so all will be well in six to nine months.

“The idea that the credit crisis is over is the message that firming financials are communicating as media supports that position. Media has declared gold as DEAD.”

Most of that, Sinclair says, “is raving BS,” and we agree.