Good Afternoon,

Fresh three-month lows of just above $860 were set in bullion prices today amid continued erosion in the commodities complex. Long liquidation ahead of today's Fed rate decision followed a combination of weak euro zone sentiment and a greenback gunning for - and hitting - the 73 mark on the index. The euro traded at a four-week low of near 1.553 against the dollar. April will turn out to be a month of net gains for the dollar - the first one this year against the euro, and the largest in four years against the Japanese yen. On the other hand, gold, which started the month with a bad April Fool's $33 decline from $915 to $882 will close out this stormy month with a net loss, and has now notched two consecutive months of declines after hitting an all-time high in March.

Perhaps nowhere is the evidence of the turn in gold sentiment as vivid as in the fast-melting holdings of the much-vaunted gold ETF - it has now lost another 10.7 tonnes of metal just yesterday. That drop, coupled with last week's largest exodus of gold in the fund's history made for (unregulated) central bank-sized amounts of metal coming onto the market over recent days, and have very likely contributed to the snowballing of the fall in the metal's prices. We had expressed concerns in the past that the vehicle was an untested entity and that while it may well have contributed to the ascent in gold in a substantial manner, it remained an unknown impact factor in periods of price declines. We can now begin to see what its effects may be during such a phase in bullion prices.

New York spot trading tried to maintain a $3 gain for much of the morning, but the session eventually gave way to a $7.30 loss and bullion declined to $863 as players remained skittish ahead of the results of the Fed meeting at 2:15 NY time. Today's GDP and ADP jobs report numbers both came in better than expected by analysts albeit the GDP would probably have shown negative numbers had it not been for an increase in inventories. Crude oil fell another $2 to $113.70 and helped keep speculators on the defensive. Although dip buyers are lurking on the sidelines and might start scattered purchases, there is a fair amount of background apprehension that gold's next target(s) my be down near $845 or $800. However, some counter-trend rallies could yet emerge amid the ruthless selling. Silver gained 3 cents to $16.55 largely due to copper's GDP-related gains, while the noble metals fell once again, with platinum down $9 to $1917 and palladium losing $6 to $420 per ounce.

Here is a summary of the post-Fed punditry and related market action:

- The Fed did cut by 1/4 percent, as expected. No surprises there. Markets had priced in the action, thus it was as if it did not happen.

- The US dollar rallied shortly after the news.

- Gold fell towards 865, then rallied towards $870.

- Oil was down $1.29 to at $114.34

- Stocks, which had been up 123 points, remained on the plus side but later gave up some of those gains.

- Language by the Fed indicates that it expects inflation to moderate and its series of measures taken since September to begin showing effects in the real economy.

- We did not get the impression that today's statement signaled a 'pause' - albeit expectations now show a 75% chance of NO cut, come June.

- The Fed still appears focused on reviving the economy and has not (yet) shifted to an inflation-combating stance. It apparently expects a weak economy to take care of the inflation problem for the moment.

- The Fed remains attentive to price developments in the commodity markets.

- The Fed refused to close the doors on any policy options as it tries to ensure that the economy is first revived.

The above now leaves some room, and one more opportunity for gold to try to get back to a level nearer to $900 before the summer doldrums set in. The background picture remains less than conducive to a full resumption of the bull track, but it will give the expected knee-jerk buy gold/sell dollar scenario to trade upon. The bigger question is, for how long? Barring some really bad news from the financial sector, we are of the opinion that we have just seen the bottom of this rate cut cycle. Thus, as mentioned yesterday, gold now has to make a go of it on its own - it cannot count on more rugs being pulled from under the dollar with any certainty. Surely, not the certainty that has ruled since September 2007, and became an addiction.

Happy Trading.