The Fed’s minutes didn’t budge any of my indicators today. Gold and silver were in the red most of the day. Gold is fighting the $1,200 resistance and silver flirts with the $17 mark. We have been here for several months despite some trips in both directions for a week or so. Be patient and let the trend develop for traders that want to go long for a bit and for those looking to purchase physical, my advice is still the same; dollar cost average into a position. If you don’t know what to do, call me and I’ll give you the best advice I can based on your personal situation.
I guess CNBC did a survey of 800 Americans and found out that their views of the economy are at 8 year highs. These 800 must watch a lot of CNBC to have that view. Of course the article was written by the most bullish of them all, Steve Liesman, who is there to support the Fed every chance he gets. Naturally I would agree the stock market is doing quite well, but the stock market IS NOT the economy. Please know the difference.
Here’s what the market makers (professionals) did to the market today after the Fed minutes came out. Their job is to run stops, meaning today they ran the longs out with the fast drop, then rand the shorts out with the quick rise. Any excuse to do so is “business as normal,” right?
Another Fed member spoke today, Jerome Powell. He made some good comments below on the timing of raising interest rates and the difficult job the Fed has.
Powell, considered a monetary centrist, expects economic conditions to support a rate hike later this year. But he stressed, “The precise timing of liftoff is less important than the path of subsequent additional rate increases.”
The Fed should move gradually, he said: “If the economy improves faster or inflation increases more than expected, it will be appropriate to raise rates faster. And if economic performance disappoints or inflation remains lower than expected, it will be appropriate to delay liftoff or raise rates more slowly thereafter.”
“There is no risk-free path for monetary policy,” he added, citing the risk of raising rates too quickly, which could weaken the economy more than expected and force the central bank to reverse course.
But then he follows it up with this nonsense;
On the other hand, Powell said, “Overly accommodative monetary policy also poses risks,” such as an overheated economy sparking inflation concerns.
He said he’s more concerned, however, about accommodative policy that could lead to “frothy financial conditions and eventually undermine financial stability.”
For now, current policy “may not only help restore some of our economy’s potential, but should also help return inflation to our 2 percent objective more expeditiously,” said Powell, who blames low inflation on “two transient shocks,” the oil collapse and the stronger dollar.
There is no data I see that would get me to talk about an overheated economy. And the stronger dollar is simply because of the other world currencies that are weaker (Euro, Yen, Pound, Canadian Dollar). Lower rates and QE are supposed to weaken the currency yet here in the U.S., because of how bad things are everywhere else, there is no weakness. “Perception” of the dollar (and Treasuries) being a safe place to be trumps everything else.
I’ve been talking about a strong dollar for about 4 years now. How did I know it was coming? Because I have studied the data in Japan and Europe and have written extensively about it. Yes, there are issues here in the U.S. to date, but they pale in comparison according to the investing public who stick their money in stocks, treasuries and the dollar. Yes, they will become an issue at some point. Yes, over time, it will take more of all currencies to purchase gold and silver. Remember this despite my short term predictions on gold falling below $1,000.
Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with capital you can’t afford to lose. This is neither a solicitation nor an offer to Purchase/Sell futures or options. No representation is being made that any account will or is likely to achieve gains or losses similar to those discussed in this outlook. The past track record of any trading system or methodology is not necessarily indicative of future results.
All trades, patterns, charts, systems, etc. discussed in this outlook and the product materials are for illustrative purposes only and not to be construed as specific advisory recommendations. All ideas and material presented are entirely those of the author.