The markets and Gold price do not appear to be very pleased with Operation Twist

The markets and Gold price do not appear to be very pleased with Operation Twist, at least not at first glance. Following the Fed meeting, U.S. equity markets turned sharply lower, with the Dow Jones Industrial Average (DJIA) closing lower by 283.82 points, or 2.5%, at 11,124.84.

However, gold also turned lower and the U.S. dollar rallied after the Federal Reserve announced plans to extend the average maturity of its holdings of U.S. Treasuries, also known as Operation Twist. The U.S. Dollar Index, a trade-weighted measure of the greenback versus several of the world’s other leading currencies, climbed from negative territory on the day near 76.80 to as high as 77.33. The euro gave up its modest gains against the dollar as it slid 0.2% to 1.3673 this afternoon.

Joseph Arsenio, Managing Director at Arsenio Capital Management, commented to Reuters that “The market is deteriorating because the Fed didn’t reduce yields on reserves. There is no additional impetus for banks to lend. It wasn’t sufficiently stimulating. The stock market is reacting to that and since that has been fairly closely coordinated with oil markets, we’re seeing declines there as well.”