The Federal Reserve’s policy setting commission, the Federal Open Market Committee, is meeting in Washington today and tomorrow. Of course, the Internet is buzzing with speculation about a possible announcement of a new stimulus program.  However, most analysts are looking to the Fed’s annual symposium  in Jackson Hole, Wyo., later this month for any kind of major stimulus endeavor. It was at previous Jackson Hole symposiums that the Fed announced its earlier rounds of quantitative easing, as well as its most recent effort, dubbed Operation Twist.

Fed watchers also are  speculating as to what form of stimulus, if any, the Fed might use. QE1 and QE2 allowed the Fed to create money and use that money to buy Treasury bills and mortgage backed securities. Operation Twist saw the Fed convert much of its short term bond holdings into longer term bonds in an effort to push down the interest rate on 10 year Treasury bills, which is used by banks as a factor to determine the interest rates they will charge on loans, and  is one of the reasons for the record low interest rates in the mortgage market now.  This time, Fed watchers are looking to a program recently used by European central banks, called “Funding for Lending.” Fed Chairman Ben Bernanke hasrecently expressed interest in the program, which would loan money to banks at a low, if not zero, interest rate, which the banks would then be required to loan out. The Bank of England recently undertook this program in its most recent round of stimulus.

At 5 p.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1,615.60, Down $6.00.
• Silver, $28.05, Down $0.09.

Precious Metals prices remained even in overnight trading, ahead of the start of a two day United States Federal Reserve policy meeting. The main area of focus remains the eurozone and possible quantitative easing domestically. There is a growing feeling among investors that there will be action taken on both fronts. Regarding quantitative easing, HSBC wrote in a note to investors, “Some of the tools the Fed could use (to stimulate growth) include extending the use of quantitative easing, extending (its bond buying program) 'Operation Twist,' or employing new tools such as cutting interest on reserves, or extending interest rate guidance. Traditionally,  Gold prices closely follow U.S. monetary policy indications.” UBS also increased its Gold price projections in the near term, saying the metal’s price would reach $1,700 to $1,750 per oz within the next three months.

U.S. stock futures were on the rise ahead of today’s Fed meeting, which will extend the S& P 500’s monthly gains. The expectation remains that any action taken by the Fed is most likely going to be in September. The most likely scenario would be the purchase of housing and government debt. Strategist Henrik Drusebjerg said, “Recent policy maker  comments suggest more quantitative easing is in the making. This time, (Fed Chairman Ben) Bernanke will wait for the European Central Bank, as the Fed for once plays second fiddle.”

Meanwhile conditions in Syria remain quite dire. However, a plan has started to form over President Bashar al-Assad’s removal from power. United States Defense Secretary Leon Panetta has said, “I think it’s important when Assad leaves -- and he will leave -- to try to preserve stability in that country. The best way to preserve that kind of stability is to maintain as much of the military and police as you can, along with security forces, and  hope that they will transition to a democratic form of government. That’s the key.” He was also quick to point out that it is “very important that we don’t make the same mistakes we made in Iraq.”

At 9 a.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1,626.50, Up $5.00.
• Silver, $28.32, Up $0.19.

Gold prices have started the week in a holding pattern. After last week’s significant climb of over two percent, the yellow metal waits for a signal from the central banks in Europe and the United States this week to determine a course of action. Most expect the European Central Bank president Mario Draghi to deliver on a promise he made last week of doing “whatever it takes” to save the euro.  If he doesn’t, some believe it could have serious repercussions.  " The market will be very disappointed if Draghi doesn't deliver," Commerzbank analyst Daniel Briesemann said. " The expectations for the upcoming ECB meeting are very high, and he must say something really significant. If he fails to do so, we will probably see lower commodity prices across the board, due to a stronger U.S. dollar."

In the United States, the theme of the Federal Reserve discussions continues to be a third round of quantitative easing to help further stimulate the economy. In Europe there is now talk of a round of easing for that region.  The European Central Bank is to release a decision on Thursday regarding their future plan of action.  While it is not believed that there will be any drastic measures such as monetary easing to happen this week, it is expected some action will be taken. That may come in the form of restarting the controversial bond purchasing program or more action on interest rates.  Not all members of the European Union agree with such measures. The president of one of Germany’s largest banks is one of them. " The mechanism of bond purchases is problematic because it sets the wrong incentives," a spokesman for Bundesbank President Jens Weidmann told Reuters.

As the precious metals market waits for its cue from the central banks, so does the stock market.  " You won't get movement either way, the market just has to catch up with itself," said Ken Polcari, managing director at ICAP Equities in New York. " That being the case, certainly everyone thinks that Europe is going to come out with this big bazooka and they also think the Fed will launch so therefore the market is going to stay up here."

At 1:03 pm (EDT), the APMEX precious metals spot prices were:

• Gold, $1619.70, Down $0.60.
• Silver, $28.10, Up $0.51.

American stock futures rose this morning ahead of the  second quarter gross domestic product (GDP) estimate release. Economists predicted a rise of 1.3 percent in the GDP, and the actual number was slightly higher than expected at 1.5 percent. Though the number was better than expected, the number is still well below the first quarter’s numbers. Gold gave up some early gains on the news as the American dollar recovered from losses.

A French newspaper reported that  action from the European Central Bank (ECB) is imminent  in the form of buying Spanish and Italian government debt. The report comes a day after ECB President Mario Draghi pledged “to do whatever it takes to preserve the euro.” The euro has risen on that statement, giving support to the Gold price as well. Marex Spectron’s David Govett said in a research note, “We have heard all this before from Draghi (and others), and so far they have not backed up their words with action. However, I suspect we are now at a juncture where unless they act, the euro may be doomed. So it would not surprise me at next week’s ECB meeting to get some concrete evidence of action.”

Mark Mobius, executive chairman of Templeton Emerging Markets Group,  believes fiat currencies may soon be a thing of the past. “It’s already happening you’re beginning to see that trend with central banks stocking up on Gold. The estimate is that at least half of the buying is central bank buying. They are looking to the day when they can say, ‘OK, our currency is backed by Gold, and therefore we’re a strong currency,’” Mobius said. One fund manager went even further, saying, “Every single fiat currency in history has collapsed this time will be no different.”

At 9 a.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1,622.50, Up $5.40.
• Silver, $27.62, Up $0.08.

Policy making committees of three of the world’s largest central banks will be meeting independently to discuss new ways of spurring economic growth and steering their domains away from the many icebergs threatening to sink the world into a double dip recession. The United States Federal Reserve, Bank of England, and European Central Bank will all meet on the same day, and each will have its own set of problems to address. Each has recently undertaken stimulus measures with mixed results. “It’s not obvious central banks have been effective, but they’re going to keep trying,” said John Stopford, head of fixed income at Investec Asset Management. The Fed’s focus now is to reduce American unemployment, and the main way it can do that is by increasing banks’ willingness to extend credit. However, even with  interest rates already setting record lows, lending has been weak in America. Fed Chairman Ben Bernanke has expressed interest in programs aimed at directly rewarding banks for lending, or possibly directly buying bundled mortgages, shifting some of the risk of lending away from commercial banks and onto the Fed’s balance sheet.

Gold was set to close the day at its  highest price in three weeks  after comments from European Central Bank President Mario Draghi caused the euro to jump in value. “Right now, Gold is testing resistance. If we can break above it, we will get another leg higher,” said Adam Sarhan, chief executive of Sarhan Capital. Today is the first time since May 1 that Gold closed above its 100 day moving average.

At 5 p.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1,616.70, Up $6.60.
• Silver, $27.58, Up $0.01.

Gold is holding on to morning gains following comments by the president of the European Central Bank, which have buoyed the euro for a second day. “You’ve got a rise in the euro, which means a weaker dollar, and a ‘risk on’ environment, so everything that looks like a risky asset goes up.  Gold has been trading just like a commodity  (lately) and is behaving like one today,” Natixis analyst Nic Brown said.

European Central Bank President Mario Draghi has stated that as part of the ECB’s effort to protect the survival of the euro, it will be buying Spanish and Italian government bonds. This move also is believed to help lower borrowing costs. “Within our mandate, the  ECB is ready to do whatever it takes to preserve the euro,” Draghi said at an investor conference in London. “And believe me, it will be enough.”

Business investment is looking to be cooler in the second half of the year, as orders for business equipment dropped in June. Lower American consumer spending and overseas demand have many companies delaying replacing equipment. “Business investment has definitely shifted lower,” said Tom Porcelli, chief United States economist at RBC Capital Markets LLC in New York. The European debt crisis and the looming “fiscal cliff” will “put downward pressure on orders, which will translate into weaker growth in the U.S.,” Porcelli said.

At 1 p.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1,615.90, Up $5.80.
• Silver, $27.58, Up $0.02.

Uplifting comments from European Central Bank President Mario Draghi have boosted the euro for the second straight day, and Gold is following suit. BNP Paribas analyst Anne-Laure Tremblay said that positive news from the eurozone  may not be the only thing supporting the Gold price. “Yesterday’s move above $1,600 an ounce was driven by more positive sentiment towards Gold on the back of growing anticipation for QE (quantitative easing). A move above $1,630 an ounce would be the sign of a more durable upward trend,” Tremblay said.

American stock futures are also higher on Draghi’s comments. Miller Tabak strategist Peter Boockvar said, “We’re seeing another instance of central bankers  trying to save the day with the threat of their printing machine. Whenever Draghi talks about ‘policy transmission’ being hampered, it’s his Morse code for restarting their bond buying program.” In his comments, Draghi said the euro is irreversible, reaffirming his stance to save the common currency from breaking up.

United States jobless claims historically tend to be volatile in the month of July,  and 2012 has been no different. The report today showed a larger than expected drop in new claims, though many economists aren’t sold on the good news. Bob Baur of Principal Global Investors said, “I’m not sure we can see a clean number for another week or two yet. I look at the labor market and see it’s gradually healing, just healing very slowly.  Businesses are reluctant to do anything.” The less volatile four week moving average dropped, as well, and is currently at its lowest level since March.

At 9 a.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1,615.60, Up $5.50.
• Silver, $27.69, Up $0.14.