The Fed came out with their decision today and as expected did not raise rates. They also said and Yellen later confirmed that they have no plans of raising rates yet 10 of the members did say they would raise rates “sometime this year.” While I wanted to see a specific time-frame of September for raising rates, I have to point out that the Fed talks out of both sides of their collective mouths and this makes the markets confused.
Gold did respond positively to the news that the Fed did not indicate they would raise rates today or in September. Mining stocks took a breather from their decline and had a little spark lit under them. The dollar too took a breather and is in the 94 range again.
But with the Greece situation unresolved, and Janet Yellen basically telling everyone they are not involved with what goes on over there, I still see a stronger dollar ahead.
To be short term bullish on gold we must see a move to a higher high tomorrow. But gold in Asian trading is down $1.80 to $1,183. Silver is also down 8 cents to $16.03. This is not bullish by any means.
Yellen today said she had concerns for the retirees when asked a question by a bankrate.com journalist concerning that they are not getting much for their savings/CD’s. She is concerned that these retirees are not getting much but to me that is an outright lie. The Federal Reserve proved after the financial crisis that they are the bankers and other financial institutions best friends. They went to bat for the financial corporations, not for the consumers. Their interest rate policy of keeping rates lower to stir up inflation to their 2% target is so “they” can continue playing the game of making money off the spread when they loan funds to the government. If they had deflation, then their debt would become more expensive, so they implement QE and other programs to keep rates artificially low.
Are they in the best interest of the retiree? Hardly.
In fact, one of the journalists brought up the fact that the Federal Reserve was accused of helping out a corporation which a judge found to be illegal during the last crisis. That corporation was AIG. AIG immediately changed their name to Chartis to avoid negative publicity, but now, since they were given money to get back on their feet again and make Goldman Sachs whole on their derivative counter-party trades.
A few weeks ago when I was out to dinner I saw a group of well dressed individuals waiting for a table. They were all drinking and celebrating and I asked where they were all from. And they said, London, NY and a few other places and were in San Diego for a meeting and they all worked for AIG. Yes, AIG and Goldman Sachs are doing fantastic. AIG’s stock has gone up over 850% since the financial crisis. Goldman Sachs, over 400%. Thank you Fed!
And when the next crisis comes, what will the Fed do? Janet told the journalist that under the Frank Dodd Act that it is our government who will step in and do what is necessary to help the situation. How good is the government at fixing things? How nice for the Fed if the government needs to borrow trillions to fix what’s broken? And you think gold , just because it’s down now, is a bad investment? What “tools” does the Fed and the Government really have when their balance sheets are as messed up as they are? How long will the investor keep the faith in the stock market? the bond market? the currency?
I think as we sink more into a deflationary hole and Europe and Japan struggle with their debt load, that the dollar will continue to move higher and this will put some pressure on gold. But once gold is under $1,000 an ounce, I will become a little more vocal on where the bottom will come and you’ll read about it here.
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About Doug EberhardtDoug 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
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