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Europe deepens union with ECB as chief bank watchdog	20:49 Yahoo! UK & Ireland
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Dollar near nine-month high on yen in Asian trade	20:23 The News International - Business
Queensland Mining Corporation on path to copper resource upgrade at White Range	20:19 Proactiveinvestors - Australia
Rupee seen between 54.10-54.45/USD: Ssharad D Pawaar	20:18 MoneyControl.com
Asian stock markets rise with Japan's Nikkei leading the way, boosted by weak yen	20:18 The Washington Post - World
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World stocks, euro climb after Fed stimulus steps	20:15 The Business Standard
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Cliff standoff hurts economy, Bernanke says	20:06 Augusta Chronicle, Georgia
IMF: 'Urgent action' needed on Yemen's economy	20:03 Mena Report - Economy & Trade
Gold tumbles 1% to below $1,700 on technical selling	19:58 MoneyControl.com
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Canyon Resources on gold hunt in Burkina Faso; awaits drill results	19:49 Proactiveinvestors - Australia
Family Dollar Stores Inc. (FDO): Today's Featured Services Winner	19:49 The Street - Markets
Addressing double taxation a must for trans-Tasman economy	19:41 Scoop - Business
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Gold Correlates With Fed Balance Sheet

by Peter A. Grant

Dec 12, AM
(from USAGOLD.com) --

Gold is firm this morning ahead of today's FOMC policy statement at 12:30ET. It is widely expected that the Fed will hold steady on policy, while announcing the restart of outright Treasury purchases of $40-45 bln per month. These purchases will replace Operation Twist, which winds-up at the end the year. Fed chairman Bernanke will hold a press conference at 2:15ET.

An addition to QE3 will likely reestablish the upward trajectory of the Fed's balance sheet, which has contracted modestly this year. The balance sheet peaked in February at just over $2.94 trillion, then moderated to $2.81 trillion in September. More recently, the balance sheet has been edging higher again, as a result of QE3. The most recent read was $2.86 trillion for the week ended 05-Dec.

As the Fed balance sheet has consolidated, so too has gold. That $2.94 trillion high occurred in the week ended 15-Feb. Gold closed at 1728.12 that day, just above today's price. Gold has indeed tended to correlate with the Fed's balance sheet, notably rising as the balance sheet expands as I noted in my 14-Sep commentary (see the chart).

In a Bloomberg article yesterday, Deutche Bank's Joseph LaVorgna commenting on the expected expansion of QE3 said, "It’s going to be massive and open-ended in size." The combined purchases of Treasuries and Mortgage Backed Securities are likely to total $85 billion per month beginning in January. That will push the balance sheet to nearly $4 trillion over the next year; about a 35% increase from the current level. Where it goes from there is anyone's guess, particularly if new Treasury purchases are open-ended as LaVorgna believes.

The Fed's decision on the size and duration of additional asset purchases may prove to be the catalyst that finally brakes gold out of the recent range. We should get at least a preliminary indication shortly...

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