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Gold came under pressure overnight with some more mysterious selling out of Asia, the third week in a row this has occurred for no fundamental reason…as of 7:30 am Pacific, bullion is down $13 an ounce at $1,698 after dipping as low as $1,689……Silver has retreated 86 cents to $32.59…Copper is off 6 pennies to $3.63…Crude Oil is down slightly at $86.66 while the U.S. Dollar Index is down slightly at 79.83…

Fed Puts Another Drug Into Clinical Trials

The Federal Reserve dropped one “Twist” but introduced another yesterday as for the first time it spelled out the unemployment level it would like to see before it raises short-term interest rates…the Fed said it would enter 2013 with a plan to purchase $85 billion a month in mortgage-backed securities and Treasury securities, part of a continuing attempt to drive down long-term interest rates to encourage borrowing, spending and investing…the Fed said it didn’t expect to touch short-term rates until it saw the unemployment rate fall to 6.5% or lower, as long as inflation forecasts remain near its 2% target…that would mean, according to the Fed’s own economic projections, that it would keep short-term rates near zero into at least 2015…the central bank also altered its Treasury-securities purchases at the meeting in a way that will involve pumping more money into the financial system…”Operation Twist” was balance sheet neutral but yesterday’s announcement will involve new money creation as the Fed will be funding its purchases by adding reserves to the banking system…

At $85 billion a month, the Fed’s balance sheet will thus keep growing from its current $2.9 trillion, heading toward $4 trillion by the end of 2013…four years ago it was less than $1 trillion…Gold may be down today but this type of action from the Fed is definitely Gold-bullish for the long-term…

Meantime, as the Wall Street Journal stated this morning, we haven’t yet seen the real “fiscal cliff” but it’s coming – eventually…”The Fed’s near-zero interest rate policy will continue to disguise the real cost of government borrowing…one reason the Obama Administration can keep running trillion-dollar deficits is because it can borrow the money at bargain rates…Stanford economist and Journal contributor John Taylor says the Fed has bought more than 70% of new Treasury debt issuance this year…all of this will create a fiscal cliff of its own when interest rates start to rise…the Congressional Budget Office says that every 100 basis-point increase in interest rates adds about $100 billion a year to government borrowing costs…pity the President and Congress who have to refinance $15 trillion in debt at 6%…if Mr. Bernanke really wants to drive the President and Congress to reduce future spending, he shouldn’t keep bailing them out with easier money”…

U.S. Dollar Index Chart Update

In light of yesterday’s Fed announcement, how is the greenback looking?…the simple answer is, not very healthy, and generally that’s good news for junior resource investors and the commodity markets…the Dollar Index is in the midst of what appears to be a bearish head-and-shoulders top…a move down to the neckline at 79, as shown on John’s chart below, would complete this formation with additional weakness expected to come thereafter…

Federal Reserve, Central Banks To Extend Credit Lines

Top central banks are extending their arrangements to swap dollars and other currencies to make sure banks have the money they need…the decision announced this morning extends a crisis measure that was to expire Feb. 1, 2013…now it will be extended for another year…taking part are the Federal Reserve, the Bank of England, the Swiss National Bank, and the Bank of Canada…the Bank of Japan is to consider the measure at its next meeting…

EU Strikes Banking Deal

The European Union reached a landmark deal overnight to make the European Central Bank the bloc’s top banking supervisor, giving EU leaders greater confidence that they are gaining the upper hand over the euro zone’s debt crisis…EU finance ministers forged a deal on the single supervisor in the early hours of this morning after marathon talks…leaders will give their stamp of approval at a summit starting later in the day, their last of 2012, and also discuss closer fiscal ties for their troubled currency area…after a hectic year of crisis management, during which Greece had a close brush with the euro zone exit, getting an agreement on the first stage of a banking union is a victory for the EU and represents a bold step towards pooling sovereignty…the reform requires governments to surrender jealously guarded control over national banks, in the most concerted financial integration project since the creation of the single currency…

Canadian Household Debt Burden Climbs

A key measure of consumer debt continues to swell in Canada…the level of household credit market debt to disposable income reached 164.6% in the third quarter of the year, Statistics Canada reported today, up from 163.3% in the second quarter…in its latest financial system review, the Bank of Canada warned again that the biggest domestic threat to Canada “continues to stem from the elevated level of household indebtedness and stretched valuations in some segments of the housing market”…

Today’s Markets

North American markets are off marginally so far today...as of 7:30 am Pacific, the Dow is up 5 points…fresh data this morning showed that weekly jobless claims in the U.S. fell sharply while retail sales rose in November…the TSX, meanwhile, has shed nearly 60 points with the Gold sector under pressure…the Venture Exchange is off 12 points to 1173, about 20 points above the yearly low from late June…Asian markets were mixed overnight…Japan’s Nikkei average surged above 9700 for the first time since early April, with exporters buoyed by a yen that falls as expectations rise that the Bank of Japan will implement more aggressive monetary easing…European shares are slightly lower in late trading…

Kaminak Gold (KAM, TSX-V)

Kaminak Gold (KAM, TSX-V) has come out with an earlier than expected initial NI-43-101 resource estimate for its Coffee Project in the Yukon – 64 million inferred tonnes grading 1.56 grams per tonne Gold for 3,236,000 ounces of Gold at a base case cut-off of 0.5 g/t Au for oxide and transitional material and a 1 g/t Au cut-off for sulphide material…this is generally within expectations, and Kaminak geologists see considerable expansion potential along strike from the current resource and elsewhere on the 150,000 acre project…below is an updated 2.5-year chart from John…KAM has responded well to this morning’s news (up 16 cents at $1.42 as of 7:30 am Pacific), underscoring how great a deal this was just a few days ago when it was trading at just $1 a share…

GoldQuest Resources (GQC, TSX-V) Chart Update

RoxGold Inc. (ROG, TSX-V)

Roxgold Inc. (ROG, TSX-V), with projects in West Africa, has been recovering nicely since hitting a low of 44 cents in August…ROG closed at 81 cents yesterday, and it’s worth watching closely as it appears to be in the midst of a significant new uptrend after completing a 3-wave corrective phase…below is John’s 6-month daily chart…as always, perform your own due diligence…