The latest FOMC minutes had two obvious points to note:

Firstly, that supply chain bottlenecks and input shortages may not be solved quickly. In which case these factors could be putting upward pressure on prices beyond this year. The significance is that the FED may be a little more patient on inflation rising.

Secondly, there was the reaction by the markets to this sentence: ‘a number of participants suggested if the economy continued to make rapid progress towards the Committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing the plan for adjusting the pace of asset purchases’. Now, this is very self-evident. Of course, at some point in the future, it will be relevant. It is normally a filler line to the minutes. However, it sends the US 10 years flying high and the USDJPY higher with it.

This of course sent gold lower. However, crucially the $1860 level held and the short term upside bias remains in place technically. However, it tells you how jittery the market is to tapering. To even begin to think about them is enough to have that kind of reaction.

In 2013 when tapering was announced by the then chair Bernanke US 10 year yields.

The takeaway

So with any surprise taper moves from the Fed the trade is to buy USDJPY sell gold. The market is sensitive to tapering and the moves are likely to be accented.