Gold and silver are trading lower on Tuesday thanks to technical selling after gold hit 9-month highs in the early morning hours of Monday. Investors across the world are focusing on the FOMC this week as they are currently holding their monthly policy meeting. With the possibility of further tapering a very real one, investors everywhere will likely hold their positions until the conclusion of the FOMC meeting Wednesday afternoon. After periphery currencies everywhere felt pressure yesterday and financial markets were a buzz of confusion, today saw things stabilize a bit.

Further Tapering Could Spell Doom For Equities

Since US equities hit all-time record lows towards the end of 2009, they have since been on a somewhat consistent climb. In recent weeks that climb became more of a spike as equity markets across the globe exploded. The insanely strong run posted by most equities around the world has since come to an end and markets have once again stabilized. However, with the possibility of a further reduction to QE growing by the minute, equities may be on the decline shortly.

As it stands a majority of the market is expecting to see yet another $10 billion reduction to Quantitative Easing as a result of tomorrow’s meeting. Should this be the case, more investors will abandon their equity holding in search of more reliable, safe assets. We are already seeing a rise in safe-haven demand for gold and silver of which may intensify tenfold if another tapering announcement is made tomorrow. After breaking the $1,270 threshold early Monday morning, it is clear that gold and silver are able to break through key resistance levels, now the only question pertains to whether or not gold and silver can break through these same resistance levels again and hold on to those positions.

Recently weak economic data out of China is not doing gold any favors though, as the world’s biggest consumer of raw commodities seems to be slowing down. It will be important to keep a close eye on China over the coming months in order to see if the expected stagnation will ensure or whether their economy can prove the world wrong yet another time and persevere through the hard times.