The Federal Reserves has cut the rate by 0.5%, which takes it down to 1.0% as part of its plan to stimulate a flagging US economy. In anticipation of the rate cut the DOW put on 10% on Tuesday in a classic case of buy the rumour. The day after a rate cut usually results in higher equity prices, however once the euphoria wears off the market regains its focus on the negativity of the recession and the gains are wiped out.

Gold bugs will be watching to see if the US Dollar loses any of its value because of the this rate cut which in turn is usually good for gold when measured in dollar terms. However these are un-chartered waters so we should be prepared for the unexpected.

Have a good one.

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