Buy The Rumor And Sell The Fact? Or Buy The Fact And Sell The Rumor?

May 20, 2021

Federal Reserve Chairman Jerome Powell said in his last press conference. “We’re not thinking about raising rates. We’re not even thinking about thinking about raising rates.” In regards to the Fed tapering its monthly $120 billion asset purchases, which has swelled the Federal Reserve’s balance sheet to an excess of $7 trillion ($7.831 trillion to be exact), Powell said that the Fed is not considering a pullback anytime soon.

Then after the bank’s regular two-day meeting among senior officials, Chairman Powell said, “The Fed would stay the course until the economy strengthened even further and coronavirus cases fell sharply.”

Many economists believe that the Fed is months away from any decision to taper its bond-buying program. Adam Posen, president of the Peterson Institute for International Economics, said, “Everybody should ignore the Fed for the next six to nine months. They are not going to do anything. No matter how much people in the markets start freaking out … Chair Powell has made it very clear: they are going to sit tight and let inflation come to them before they do anything.”

Today the minutes of the last FOMC meeting were released. Which raised the question when Powell said, “We are not even thinking about thinking about raising rates” did he mean we in the royal sense as in “me.”

This question was raised when after reviewing the minutes, it was clear that some Fed members were open to a debate at “upcoming meetings” on scaling back their massive bond purchases and potentially putting taper talks on the table as early as next month.

Bloomberg reported that minutes suggested that “A number of participants suggested that if the economy continued to make rapid progress toward the committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases,” according to minutes from the April 27-28 Federal Open Market Committee meeting published Wednesday. Various participants noted that it would likely be some time until the economy had made substantial further progress toward the committee’s maximum-employment and price-stability goals.”

The minutes rippled through the financial markets and created a roller coaster ride for gold traders and investors. Gold futures basis the most active June 2021 Comex contract traded to a high of $1891.30 and a low of $1852.20. The last time gold traded to a high above $1880 was January 8, 2021. As of 5 PM, EST gold futures are currently up by $2.10 and fixed at $1870.10.

On a technical basis, our studies suggest that there is still more room to the upside for gold pricing. $1900 is still a real probability, with major resistance occurring at $1960 per ounce.

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Nearly 40 percent of all gold ever mined was recovered from South African rocks.

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