From Bill Cara's blog: http://caracommunity.com/

CTA Trading Desk Morning Report

[8:30am ET] Good morning, Geoff here.

Yesterday, the Federal Reserve stated that they are happy with the direction of the US economy and suggested that another Quantitative Easing program is unlikely.

That led to a rally in the US dollar and a decline in stocks and gold.

The dollar decisively broke its daily downtrend line and is continuing that rally today. Consequently, gold and stocks are continuing their decline.

I mentioned yesterday that I thought there would be one more shake of the gold tree and that would be that. This is probably that shake. Because sentiment in the gold miners has been so bearish, many have already exited their positions and lack of sellers would normally provide some form of support.

However, with the broad stock market rally long in the tooth, a top in the S&P 500 and subsequent decline would put additional pressure on the mining stocks that would not normally be there.

The timing band for the next low in gold starts the third week of April. One more big flush in gold might just put the yellow metal in an extremely oversold position whose timing is perfect for a low that would hold for months. THAT will be trade of the year and could mark the final low before the next really big move higher. This is when you need to hold your core gold positions and look to add into major weakness because a quick rally often follows a flush.

Of course all of this talk about a final climax low in gold is premature and a few months from now we will look back at this area and wonder why everyone wasn’t backing up the truck at these levels. Keep your core position and look to add in the next few weeks, simple as that.

This talk by the Fed of pulling the punchbowl away is just that - talk. Operation Twist ends June 12 if I am not mistaken, but they will provide liquidity for as long as is needed to keep assets inflated.

Regardless, negative real rates and the increase in government deficits ensures that the metals will eventually make new highs once again.