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Gold has traded between $1,312 and $1,324 so far today after re-testing Fib. support yesterday at $1,307…as of 6:45 am Pacific, bullion is up $1 an ounce at $1,315 as the important 2-day FMOC meeting begins…Silver is down 21 cents at $21.64…Copper is up a penny at $3.21…Crude Oil is off 70 cents at $105.89 while the U.S. Dollar Index has fallen by more than one-tenth of a point to 81.13…

The Fed will decide to cut monthly purchases of Treasuries to $35 billion from $45 billion and keep mortgage-bond buying at $40 billion, according to the median estimate of 34 economists surveyed by Bloomberg September 6…we’ll see if they’re correct…Gold in our view has already priced in a scaling back of at least $10 a month in QE3…as we’ve mentioned, a “sell on rumor, buy on news” scenario is very possible as far as bullion is concerned regarding tomorrow’s Fed decision…the language the Fed uses in its policy statement, followed by Chairman Ben Bernanke’s “spin” in his news conference afterward, could be just as important as the tapering number itself if the Fed does decide to begin scaling back its monthly bond-buying program…and the extent to which the Fed is going to be able to slow the growth of its ballooning balance sheet ($3.6 trillion) over the next 6 months to a year is going to be interesting and critical to see…

Peter Schiff, CEO of Euro Pacific Capital and a known greenback bear and Gold bug, told CNBC:  “[The Fed is] afraid that just the beginning of the taper might be the beginning of the end, because the bond market might get killed, which means interest rates rise for the government, mortgage rates rise for the homebuyers, and that’s it for the recovery.”

Goldman’s head of commodities research, Jeffrey Currie, told Bloomberg television last Friday that Gold may drop below $1,000 for the 1st time since October 2009 as the Fed gradually withdraws stimulus and the economy improves…it may then stabilize near $1,200 over the longer term because of production costs, he added…Currie issued a sell recommendation for bullion on April 10 before prices plunged 13% in a 2-session slump (the “Goldman Gold Smash”) that sent the metal plunging below critical support at $1,500…Currie made a good call in April…we’re not so sure he’s going to be right this time around…the Chinese have proven to be very aggressive buyers on any significant weakness in Gold (there has been a large shift in physical Gold from West to East in recent months) and prices below even $1,300 an ounce on a sustained basis would make many mines uneconomic…combined with what we already know is considerably less exploration, Gold supply would be critically affected…the Venture Exchange has also not been performing in a way recently that would suggest another plunge in Gold prices is in the cards…in fact, the Venture has significantly out-performed bullion so far this month which is highly encouraging…the Index has shrugged off 4 significant down days in Gold this month totaling about $100 an ounce – behavior we haven’t seen by the Venture since its bear market began in early 2011…

U.S. Dollar Index Alert – Major Move In The Works?

There are some interesting developments in the U.S. Dollar Index, making this a critical week for the greenback…yesterday, the Index dropped below a down trendline for the 1st time in its 2.5-year uptrend…it could quickly and violently reverse higher, or take a plunge…the latter scenario seems more likely…RSI(14) has been trending down since May and there was an RSI(14) divergence with price when the Index peaked at the end of June/early July, right around the time both Gold and the Venture appeared to bottom out…the Dollar Index could easily test chart support at 79 in the near future which would be bullish for both Gold and the Venture…

Interesting op-ed piece by Martin Fieldstein in this morning’s Wall Street Journal (“How To Create A Real Economic Stimulus”)…he argues, correctly, that entitlement reform in the U.S. is key to shrinking the ratio of debt to GDP and making room for pro-growth tax cuts…

“The national debt has increased from 37% of gross domestic product before the economic downturn to 75% now. The Congressional Budget Office warns that the debt will remain at that level for the coming decade and then rise rapidly as the aging population increases the cost of Social Security and Medicare. The large projected national debt is a drag on the economy, causing businesses and entrepreneurs to fear higher tax rates and a sharp rise in interest rates when the Fed stops its massive bond purchases (our note – the federal government also should be fearing a sharp rise in interest rates as that’s how its debt could really explode).”

“Entitlement reforms and a limit on tax expenditures are the keys to creating the framework for the tax-rate reductions and infrastructure spending that can stimulate growth and employment while gradually shrinking the relative size of the national debt. Without such a program, the U.S. economy will continue to limp along with slow growth, declining earnings and weak employment,” Feldstein concluded…he was Chairman of the Council of Economic Advisers under President Reagan…

Today’s Markets

Asian markets were weaker overnight amid anticipation of a reduction in U.S. stimulus ahead of the Fed meeting…China’s Shanghai Composite corrected 46 points or 2% to close at 2186…Japan’s Nikkei average was also lower, finishing down 93 points…

European shares are down modestly in late trading overseas…

Stock index futures in New York as of 5:50 am Pacific are pointing toward a slightly higher open on Wall Street after strong gains yesterday and last week…the Labor Department reported this morning that its Consumer Price Index edged up 0.1% in August after rising 0.2% in July…in the 12 months through August, the increase in the CPI slowed to 1.5% after advancing 2% in July…the Fed would have no trouble seeing inflation heat up a little bit…Fed officials have expressed concerns about the dangers of deflation…

TSX Updated Chart – Important Breakout Imminent?

The outlook for the TSX continues to be very positive – note the reversal at the end of June and the firm uptrend in place as the Index gets set to challenge strong resistance at 12900, a level it has failed to overcome on several occasions since the beginning of last year…below is a 6-month daily chart from John…important breakout appears imminent…the TSX Composite closed yesterday at 12817…

Garibaldi Resources (GGI, TSX-V)  Chart Update

The recent pullback in Garibaldi Resources (GGI, TSX-V) has been very healthy from a technical point of view, and has also moved stock from weak hands into strong hands – a necessary process in order to lay the groundwork for a sustained move higher…in fact, there are some very interesting similarities between the GGI chart and the Canada Carbon Inc. (CCB, TSX-V) chart immediately below it…CCB surged from a nickel to 19 cents, corrected to 9.5 cents (its rising 100-day SMA), and then zoomed beyond 30 cents…GGI went from a nickel to as high as 17 cents, corrected back to its 100-day SMA yesterday, and now appears well-positioned to resume its upward climb…

RSI(14) on John’s 6-month daily GGI chart has reversed to the upside after touching previous support, and Slow Stochastics shows a bullish +DI/-DI crossover…we continue to smell something special brewing up in the Sheslay River Valley, an area that has the clear potential to produce the next significant discovery in northwest British Columbia in the weeks ahead…

Canada Carbon Inc. (CCB, TSX-V) Updated Chart

Canada Carbon Inc. (CCB, TSX-V) clearly has momentum on its side as it closed above resistance at 30 cents yesterday…while RSI(14) at 79% shows significantly overbought conditions on this 3-year weekly chart, momentum could easily carry CCB to the next Fib. resistance level in the near future which is 36 cents…that’s not a price target, just a theoretical level based on Fib. analysis…as always, perform your own due diligence…

Note: John and Jon both hold share positions in GGI.