The Move In The Metals Isn't About Japan's Rate Cut and QE Announcement

Japan announced a renewed zero interest rate policy and a quantitative easing initiative designed to jump-start its economy and presumably drive the yen lower vs the dollar in order to stimulate exports.  Here are the details via the NY Times:  LINK

While gold did jump in price when this news hit the tape around 12:45 a.m. NY time, interestingly most of the overnight move in gold and silver did not occur for another three hours, when London opened:

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Just as interesting, while the yen initially dropped vs. the dollar, it is now trading higher vs. the dollar than when the news hit the tape.  The spot dollar plunged  is now well below the 78 level:

(click on chart to enlarge)

I don't know about anyone else, but I find this market response quite interesting and it's not what I would have expected - at least initially - if someone told me that the Bank of Japan was going to ramp up the currency wars like this last night.

Actually, I would have expected gold to pop, but I also would have expected to see the yen plunge vs. the dollar, at least for the short term.

So what is going on here?  I believe the market is responding to what it believes will be the U.S. Fed's "counter-measures" to Japan's move last night.  In fact, Japan's QE proposition is actually quite small (including the bank lending pool announced, it's not much more than $400 billion) compared to the first round of QE of roughly $1.7 trillion in total by the U.S.  It is my view, in conjunction with the speech issued last week by the NY Fed's William Dudley (who is also a former Goldman Sachs partner, meaning he is plugged into the policy channels if not creating them outright), that the U.S. is getting ready to announce, in some form, an even larger stimulus program next month. 

The precious metals market and the US dollar index are thus behaving in a manner which is consistent with the expectation by the market that the Fed/Obama Admininistration will respond to Japan's currency war shot with an even more powerful shot across the bow of its own.

As I write this, gold and silver continue to spike higher.  The big banks who are short gold and silver via leveraged paper positions are going to get annihilated here.  The "spikes" in prices are coming in "waves" that reflect the waves of nausea and vomiting that are occurring with the traders on the Comex/LME who are managing absurdly excessive paper shorts.  Today may be the day that these traders are carted off the metals exchanges on GATA stretchers.