With the metals markets rallying, this is what is creating a strong bid in the gold market today.
Here is what Peter Boockvar wrote today as the world awaits the next round of monetary madness: In her speech and Q&A (including twitter) late yesterday, Janet Yellen said nothing new but seems to feel pretty comfortable with where the Fed is positioned in terms of proceeding with their exit and “allowing the economy to kind of coast and remain on an even keel.” She continued to defend the stance that “we want to be ahead of the curve and not behind it.” Our readers know how we feel about this. She also said “I think we have a healthy economy now.”…
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Herein though lies the challenge of the Fed: looking purely at the statistics defining unemployment and inflation, the Fed is essentially at their stated goals and should already have normalized interest rates and their balance sheet, aka, going to where the pass is being thrown. Instead of course they are only 1/3 of the way there on rates (assuming the 3% eventual fed funds target they envision) and their balance sheet is essentially still at peak size. On the so called “healthy economy,” I sure wish it was but after a 1.6% growth performance in 2016, Q1 growth may be below 1%.
The auto sector is rolling over, new home sales are still below where they were in 1980 when interest rates were double digits, capital spending as measured by core durable goods orders is back to where it was 11 years ago, productivity is barely rising, student debt is negatively impacting the spending habits of Millennial’s with overall consumer spending running at a still mediocre pace, corporate America is loaded up with debt, commercial real estate is topping out with loan growth in 2016 3% below 2015 according to the MBA in today’s WSJ and savers are still suffering for their thrift which then forces the need for more saving. The US economy is just ok and is far from healthy which means that it’s highly vulnerable to this reduction in monetary accommodation. Right now all we have is hope that the right fiscal initiatives on tax and regulation will light the fire under the economy which I so we get and hope it does as a result.
There Is No Good Time For The Fed To Exit
This then begs the question I get asked: if you think the US economy is still challenged, why should the Fed be raising rates and reducing their balance sheet and my only response is there will never be a good time to exit from their extraordinary policy considering how extreme it was. The distorted level of interest rates is why the US economy is growing slowly and there is almost no chance a recession can be avoided no matter when they decide to reduce the easing. Thus, they might as well get it over with sooner rather than later.
King World News note: The Fed has boxed itself into this position, and Boockvar is correct, ‘there will never be a good time for the Fed to exit from their extraordinary policy considering how extreme it was.’ There will be some economic chaos as the Fed makes this move and that will put additional large bids into an already strengthening gold market. A break above the key $1,400 level will be a signal that the next major move higher is already underway in the gold market. Of course this will propel the silver market higher as well.
***To listen to the KWN audio interview with Larry Lindsey that has now been released CLICK HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: Here Is What Will Immediately Trigger A Surge To $25 Silver CLICK HERE.
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