Here Comes The Sideways?
The metals remain trade bound, but based on previous FOMC meetings and their current tip-toe action downwards, I would anticipate a selloff in the coming hours. Nothing new there. The market should get a boost as mainstream outlets pedal the story that the Fed just absolutely has to announce some form of easing for the markets. And many Fed representatives have talked dovishly, saying that the Fed will need to ease. But, come tomorrow, I anticipate that the markets will be very surprised as no new action is announced out of the Fed, causing a broad selloff. The truth of the matter, however, is that the Fed has been printing all along and has no intention of openly announced Q.E.W.T.F. at least in 2012. The people, after all, are merely “meddlesome outsiders.”
Silver’s performance over the past two weeks, in which the metals has traded between $28-$29 with pockets of volatility to the downside, has been strange for the traditionally volatile metal. It is due to break out of this trend, and with the metal below $28.50, it could be eyeing the next psychological resistance points in the $27 handle. Gold is doing what it can to edge below $1620, after which $1615 is a reachable target on the downside. From there, we could see the lows from earlier this month after the Queen’s Jubilee, when gold dipped well below $1600, down to the $1570 level.
Ahead of the FOMC meeting, the stock market has ticked up whilst the metals have remained sideways. Commodities like grains and softs are in the in green. This includes Rough Rice, Sugar, Wheat, Coffee, Cotton and Cocoa. Gold and platinum are in the black on marginal down days and silver in the red, down 27 cents.
Goldman Sachs has announced it is expecting a Fed announcement, but Goldman has not necessarily been the best predictor of economic trends. The bank has said that a new Operation Twist would not be enough to stave off more downturning. Wrighton ICAP has also announced expectations of quantitative easing, as their chief economist has said, “While the Fed hates being held hostage by market expectations, we doubt it will be prepared to disappoint global investors this week.”
Even the CFR is expecting an announcement of stimulus of some sort. Whereas banks and investors quoted by the mainstream are predicting more than a continuation of Operation Twist, the CFR believes this is all that is likely to come to pass.
Yeah, right – market participants are holding the Federal Reserve hostage?
Last April, as the Fed’s Open Market Committee met, the unemployment rate officially had just been lowered from 9.1% to 8.2%, an imaginary official number for a nation with many states where the unemployment rate is touching 30%. That’s Grecian type numbers. At that time, the Fed predicted that “The unemployment rate will decline gradually,” it predicted, “towards levels that it judges to be consistent with its dual mandate,” without need for new monetary stimulus measures.
In the bottom graphic, the “central tendency” of the Fed’s April unemployment forecasts is highlighted, representing the range of forecast minus the top and bottom three forecasts.(how convenient to leave out three from the bottom, two from the top – smudgey smudgey).
So, you can see how of no use that graphic is to the thinking public.
Would not be surprised to see some big activity tonight in the after market, but for today the metals seem a bit checked out. Tonight should be interesting, and especially in the world stock markets. The U.S. performance today signals that investors are expecting a dovish statement tomorrow by the Federal Reserve, who can do a number of things such as, Quantitative Easing (market boost, big metals dip), an extension of Operation Twist (market pop, metals sideways) or announce 0% interest rates beyond 2014 (market pop, metals dip). Here’s today’s stock market:
I don’t expect any big announcements coming out of the Federal Reserve tomorrow, as a bland report will discuss no new immediate action, even if behind the scenes the American taxpayer is indeed funding the operations of the financials and also sending money to Europe. But, do expect a number of dovish statements, if not tomorrow, in the coming weeks, regarding future quantitative easing from the Federal Reserve.
That the CFR, New York Times, The Economist, Goldman Sachs and other bankers are saying that we’ve got printing to be announced tomorrow, I will stand on the opposite side of the boat, and say there will be nothing new tomorrow – although expect fireworks in the markets.
The last FOMC minutes were a tried-and-true example of bureaucraticese. It read as such:
Information received since the Federal Open Market Committee met in March suggests that the economy has been expanding moderately. Labor market conditions have improved in recent months; the unemployment rate has declined but remains elevated. Household spending and business fixed investment have continued to advance. Despite some signs of improvement, the housing sector remains depressed. Inflation has picked up somewhat, mainly reflecting higher prices of crude oil and gasoline. However, longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth to remain moderate over coming quarters and then to pick up gradually. Consequently, the Committee anticipates that the unemployment rate will decline gradually toward levels that it judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The increase in oil and gasoline prices earlier this year is expected to affect inflation only temporarily, and the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014.
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