Fed’s Vulnerability Is Gold’s Strength
The comments below are an edited and abridged synopsis of an article by Stephen Flood
The more the Fed tries to undo its past policy mistakes and alters the markets through its poor policies, the more gold and silver prices are likely to rise. The recent meeting was an example: The more Fed Chair Jay Powell spoke, the more the metals prices rose.
As expected, the Fed increased the Fed funds rate an additional 25 basis points to a range of 5.00% to 5.25%. The overriding message was, we will now wait and see.
The main change in the statement from the March meeting statement was the removal of one sentence: “The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time.”
And replaced it with: “In determining the extent to which additional policy firming may be appropriate to return inflation to 2% over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
Powell explained that this change means that they no longer anticipate that rate hikes will take place at future meetings, but instead will be driven by incoming data meeting by meeting. Hence, the wait-and-see message.
Up for discussion: Vulnerabilities exposed; contrasting opinions; and recession incoming: standby gold and silver.