The commodity, currency, bond and stock markets got a volatile day Wednesday as the FED announced a series of asset purchase plans after the FOMC meeting. In short, crude and stock prices rallied while the dollar and bond yields weakened after the announcement.

Apart from keeping policy rate low at 0-0.25% for an extended period of time, the Fed decided to buy as much as $300B of Treasuries, $750B of MBS securities as well as $100B debts for other government agencies so as to loosen credits and boost the property market.

Gold price surged to as high as 954 after the Fed's pledge as the dollar weakened. However, the benchmark futures met selling pressure afterward and settled at 889.1. Currently rebounded to 932.7, investors find buying the precious metal below $900/oz a bargain but any strong rally in the near term will likely be tempered by strength in the stock markets.

In fact, the recent upmove in gold price has been triggered by investment demand and was skewed toward purchase of ETF and physical gold such as coins and bars. Investment on futures and options also soared, but much more mildly. The phenomenon of preferring plysical golds to derivatives reflects investors' lack of confidence on the financial system (eg, counterparty risk). Since October 2008, capital inflows to gold have been driven by high financial and economic uncertainty. However, fundamental supports such as high inflation and weak dollar were absent. This probably is the reason why we fail to see a breakout of the 1033.9 peak made last March.

The stock markets advanced in the US after Fed's plan. Dow Jones Industrial Average gained 1.23% to close at 7486.58 while the S&P 500 gained 2% to 794.4, led by financial shares. In Asia morning, shares rose for a 5th consecutive day as an extension to US' rally overnight. The MSCI Asia Pacific Index added 2.3%. In Australia, Commonwealth Bank of Australia gained 4% while Macquarie Group climbed 8%.

The dollar was sold down sharply. Against the euro, the greenback plunged to 2-month low of 1.35 while against the pound, it also dropped to as low as 1.433.

Crude oil did not plunge as severely as previous week after receiving worse-than-expected inventory report. The April contract dropped almost $2/bbl to 46.92 after the US Energy Department reported a 1.94 mmb gain in crude inventory. However, the gauge quickly rebounded and reached 50.63 (broken resistance at 50.47) before closing above 49 for the day. Today, price remains strong at 49.5/50.5. If the benchmark contract can trade sustainably above 50.47, it will suggest that a medium term bottom has been formed at 33.2/33.55.