Wednesday, August 10, 2016

Fed On Hold Forever: Good For Gold And Silver

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*Jobs was a blowout number.
*Since then, the Fed has been incredibly dovish.
*We have more confirmation that the Fed would destroy global growth if they raised rates.
*For that reason, a rate hike is less of a stock market risk in the very near term.
*Fed on hold is very good for gold and silver.
After the strong jobs reports, if the Fed wanted to raise rates, they would have warned markets (NYSEARCA:SPY). Their comments since jobs however seem to say just the opposite. They are dovish. If they were to raise in a slowing global backdrop, they would destroy global growth as all money swims to the US. The Fed on hold removes rate hike risk to markets in the very near term. The Fed on hold is good for gold and silver as inflation seeps out.
Since the jobs number, we saw two key comments from the Fed. We're looking for some guidance of where they stand.
Here's the two comments since the jobs report.
1) The Financial Times quoted Fed board member Jerome Powell talking about LOWER rates.
"I am more worried about it than I was. The probability of an era of weaker growth, lower potential growth, for a longer period of time - that worries me more than it used to. [Economic forecasts] just have to be lower than I thought. [The long term Fed Funds rate] could be lower than [3%]. It could be lower than that, in my view."
Above you saw a major Fed governor say rates need to be LOWER than his long-term view.
Despite the strong jobs numbers, Fed officials are talking about lower rates?
2) The Wall Street Journal ("WSJ") just reported something very similar from another Fed governor. The WSJ quoted William Dudley as saying, "If the economic outlook abroad deteriorates and this causes foreign countries to pursue a more accommodative set of monetary policies, then the dollar would likely appreciate―other things equal― reflecting expectations of lower interest rates abroad relative to U.S. interest rates. In this case, the U.S. may need to adjust its own monetary policy path. If the (Fed) did not make this adjustment, the stronger dollar could result in an undesired tightening of U.S. financial conditions."

Chaim Siegel has been working with hedge funds and mutual funds as an analyst and PM his entire career. Chaim specializes in earnings and predicts, analyzes and reacts to earnings and earnings events as well as developing current company stories with a hedge fund perspective. If you want his analysis real time sign up to the right for real time email alerts. #in, $spy, $qqq, $iwm, $vxx, $ycs, $fxe, $EUO, $YCS, ^GSPC, INDEXSP:.INX, #elazaradvisorsllc, CME Globex: ES Disclosure: These trades can lose you money and principal especially when using leverage BY USING THIS SITE YOU AGREE TO TAKE ALL RESPONSIBILITY FOR YOUR OUTCOMES AND LOSSES AND HOLD BESTIDEAS, ITS CONTRIBUTORS AND ELAZAR ADVISORS, LLC HARMLESS

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