Faced with the same economic challenges, inflation was downplayed in this Wednesday’s FOMC meeting….There will be no hit whatsoever of a rate hike…There was just more of the usual blabber about ’slow growth’ ‘extended period’ and ‘headwinds.’
As long as Congress, the Fed and the administration twiddle their thumbs expect the market to run in a range. But on the high side, predictions are that the housing market is improving so much so, that by the election the tunnel will be in the rear view mirror. President Ron Frick of Regal Assets says “there’s really only one question investors want an answer to: What’s the U.S. Federal Reserve plan for QE3?”
QE3 is almost an expected deal – although Fed Chairman Ben Bernanke & Co. might change it to another name. But if the prospects for a third round – QE3 may appear dim, at least through the rest of 2011, when it comes to what Bernanke will say, Goldman Sachs should know. After all, William C. Dudley, a Goldman Sachs exec., is the 10th president and chief executive officer of the Federal Reserve Bank of New York. No surprises if it’s not Dudley instructing Bernanke on what to say through Goldman Sachs instructing Dudley. Either way, unfortunately, Wall Street banks and Goldman Sachs are killing their host—the American economy.
However, it does not seem US Federal Reserve policies are likely to change. Representing the American economy and destroying it, the Fed officials are once again chatting away their concerns over the economy’s threatening signs. Just as before, the same lingo of expectations will get the public’s attention up with hope, how the economic growth will be great for the rest of the year. Meanwhile, the massive infusion of money into the economy has jump-started inflation. Consumer price index rose 3.6% year-over-year in May – its fastest pace since 2008. Now with a conflict-ridden effort to pump $600 billion into the economy which is to expire in mere days, the question remains, will they see little wisdom in expanding the program anew or not.
Another question–while the central bank is sure to acknowledge the recent slowing in the pace of economic growth, just how strongly will they hold to the view that was articulated by Bernanke in a speech earlier this month– the causes of weak 2011 growth so far to be temporary. They’ll probably downgrade the forecast but perhaps more interesting whether Fed leaders adjust their view of 2012 growth. In April, top officials of the central bank expected the economy will accelerate to 3.5 to 4.2 percent growth next year, climbing out of its deep hole. It will be telling if the weak data over the last couple of months on housing, jobs and even industrial output made them rethink that assumption even a little bit.
However, although the outcome of the meeting is not going to change much in the economic view, it has already changed the value of gold . Gold spiked minutes after equity markets opened before the Fed meeting and went from $1542 around 7 AM ET, to $1556 around 9:45 ET.
Whether the spike is on concerns over liquidity conditions in China, or jitters ahead of today’s FOMC decision is the cause, its hard to tell, but it sent the precious metal flying.
Economic and geopolitical forces are increasingly governing short or long term investment and speculative trading demand for gold . To the extent to which the typical summer “doldrums” for gold are over, gold will continue to play a superior role as each economic and political events are unfolding. Although it remains to be seen if the coming summer will be a period of calm and relative stability for gold. Seasonality plays no role whatsoever in the decision to accumulate gold reserves and diversify away from the U.S. dollar.
Source: http://goldcoinblogger.com/quantitative-easing-3/#more-3189
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