Fed's last operation Twist Redux is one of those events which cause immediately brutal movements on the markets (over reacting), but can only be analyzed a few days afterwards.
Some bloggers are willing to see an offensive monetary policy behind this operation, targeted towards all others majors currencies at the same time : "risk-off" strategy, reversal of carry trade, capital inflows, commodity deflation, and we can even read "king dollar is back".
Some facts are important to remember :
1) original operation Twist I (aka Operation Nudge, 21 Feb 1961-1965) was a defensive experiment for improving US balance of payments because US had to sell gold at an unsustainable rate.
2) results were modest : the programme lowered yields by 15 basis points in total.
3) the Fed’s QE2 programme was comparable in size, at around 4% of total Treasury and agency-backed debt. It allows a 28% stock rally during few months, but without noticeable positive effects on Main Street, unemployment and foreclosures. Inflation was allowed to growth, too.
4) another Twist-like operation was run by the Fed... in 2009. Results are known : Wall Street rally but Main Street problems became bigger and deeper. The crisis became more and more a social one.
5) One of the most noticeable movement this time was gold and silver go down.
But if gold market was down during 2 days in a row, it only reached back to 11 August 2011 price level :
source: goldprice.org (clic to enlarge)
Gold price remains since 1971 a very significant trend. Operation Twist II has not changed this in any way. And you can see since 9/27 gold price is up again.
We may see a rally on Wall Street stocks. But like in 60's and in 2009, Fed's last quantitative easing programme will not produce any change in the real world, either for Main Street (commodities, unemployment, down lifestyle), and for inflation in US. Stay tuned to the gold market to verify this day after day, specially during 2012 election campaign.