Bill Holter does the heavy lifting today. Bill gives you TWO insightful articles, courtesy of Miles Franklin. But I do have a few things to say about the large fall in gold and silver today, after Bernanke’s meaningless comments. It is not possible for the Fed to stop buying bonds and I have given the reasons to you on a daily basis for a long time. This is just jawboning! They will not sacrifice the economy, the stock market and the bond market and yes, I still believe Sinclair is correct and we will have QE to infinity.
Federal Reserve Chairman Ben Bernanke said on Wednesday the U.S. economy is expanding strongly enough for the central bank to begin slowing the pace of its bond-buying stimulus later this year.
Bernanke’s confirmation that the Fed is getting closer to pulling back on its $85 billion in monthly asset purchases confirmed investor fears, sending stocks and bonds sharply lower, and pushing benchmark Treasury yields to a 15-month high.
The Fed expects moderate growth to lead to a further healing in the job market as headwinds facing the economy ease, Bernanke said. He also said policymakers expect inflation to move back up toward their long-term 2 percent goal, and dismissed recent low readings on consumer prices as due in part to temporary factors.
“The committee currently anticipates that it will be appropriate to moderate the monthly pace of purchases later this year, and if the subsequent data remain broadly aligned with our current expectations for the economy, we will continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year,” Bernanke said.
He said the jobless rate should be down to around 7 percent from its current 7.6 percent by the time bond purchases are halted.
In a change of policy, Bernanke also said a majority of Fed policymakers believe the central bank should hang onto the mortgage assets it acquired through its unconventional monetary stimulus when it decides to tighten monetary policy.
He made the statement at a news conference on the Fed’s decision to continue buying $40 billion in mortgage-backed securities and $45 billion in longer-term U.S. government securities each month as part of its effort to keep interest rates low and boost employment.
After a two-day meeting, the Fed’s policy-setting panel offered a more upbeat assessment of the risks facing the economy than they had after they last met in May.
“The committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall,” it said. The Standard & Poor’s 500 stock index closed down nearly 1.4 percent, while yields on the 10-year U.S. Treasury note hit 2.33 percent, the highest level since March 2012. The dollar strengthened.
Bernanke stressed that even a slower pace of bond buying would be adding support to the economy, and that any decision to begin removing stimulus was still a long ways off. Any eventual increases in interest rates would also be gradual, he added.
“They do indeed plan to taper purchases later this year and hope to be done by next summer. Bernanke wants to communicate that this is not necessarily tightening, but the market may not see it that way,” said Axel Merk, president and chief investment officer of Merk Investments in Palo Alto, California.
Kansas City Fed President Esther George again dissented against the Fed’s expansion of its support for the economy, expressing concern it could fuel financial imbalances and hurt the central bank’s goal of keeping inflation contained.
But in a surprise, St. Louis Fed chief James Bullard also dissented, but in the opposite direction, arguing the Fed should have signaled more strongly its willingness to keep its stimulus in place to defend its 2 percent goal for inflation.
RATE RISE NOT SEEN UNTIL 2015
–MoneyNews.com, June 19, 2013
The funds are trading in a world of make believe. They are like children playing with a loaded gun. If anything, gold should have gone UP. But this has been going on for a long-time now. I repeat, all the Fed can do is jawbone. Any honest attempt to cut back would be a disaster. No way he will allow that to happen during the last half-year on his watch.
I rather enjoyed Rick Ackerman’s comments on gold’s dismal performance today. He has it figured out. Rick wrote:
For its part, gold did not miss an opportunity to head lower, even if there was nothing in the news that should have caused this. Actually, there was a story that in olden days might have lifted the price of gold. It seems that Russia, evidently in need of economic stimulus, has joined the world’s devaluation Olympiad. We should welcome them to the club and wish them luck, since it’s going to take a pile of devalued rubles to keep energy sales firm with demand from China softening.
–Rick Ackerman, June 20,2013
Ed Steer had a lot of interesting comments early this morning:
Trading volumes, which were already high by noon in Tokyo, are now through the roof. Gross volume in gold is just north of 60,000 contracts as of 3:35 a.m. EDT…and silver’s volume, net of rollovers out of the July delivery month, is over the 11,000-contract level. The dollar index has been climbing slowly but steadily all night long…and is currently up 28 basis points at the moment.
It’s too bad that Wednesday’s and today’s trading activity won’t be in tomorrow’s Commitment of Traders Report…as the cut-off was at the 1:30 p.m. EDT Comex close on Tuesday.
How long this can go on is anyone’s guess, but “da boyz” are milking yesterday’s FOMC news for all it’s worth…and based on the current price action, I wouldn’t be surprised if JPMorgan Chase is now net long the silver market as well…a fact that won’t be known for sure until the COT Report on June 27th.
And as I hit the ‘send’ button on today’s missive at 5:15 a.m. EDT…gold is down forty-three bucks…but was down about fifty bucks at its London low of $1,303.30 in the current front month, which is August. Silver got smacked below the $20 price mark in the July contract…$19.985 to be precise…but has obviously recovered off that low, but is still down a bit more than a buck from Wednesday’s close in New York. Gross volume in gold is now over 106,000 contracts…and silver’s net volume is just over 20,000 contracts…and rollover volume out of the July delivery month is very heavy for this time of day. The dollar index is now up 49 basis points and knocking on the 82.00 door.
The thin edge of the wedge is getting thicker all the time.
When JPMorgan decides the time is ripe to let prices rip to the upside, it’s my opinion that they will be allowed to rise high enough to virtually kill gold demand stone-cold dead on a world-wide basis for as far into the future as I can see…and they’ll also put silver at such a high price that current owners will be selling in droves…and silver will become the new gold.
It’s only the timing of these events that’s unknown…but that day is coming.
Of course nobody at the CFTC or the CME Group will do or say anything…and the same goes for any of the precious metal companies that we own shares in…as they sit idly by and watch the precious metal prices get trashed…their companies raped…and their shareholders decimated.
I await the New York trading session with a morbid fascination.
–Casey Research, June 20, 2013