The Fed Panics And The Gold Price Soars

MBA, Market Analyst & Author @ The Mining Stock Journal
January 27, 2019

First it was the loudly broadcast convening of the Working Group on Financial Markets – aka “the Plunge Protection Team” – by the PPT’s el Jefe, Steven Mnuchin.  This was followed the “mouse that roared” speech from Fed head, Jerome Powell, hinting that the Fed would moon-walk away from rate hikes.

Today was trial Hindenburg launched by the Wall St Journal suggesting that the Fed was considering curtailing the the FOMC’s balance sheet Weight Watchers program.  The terminology used to describe the Fed’s actions is Orwellian vernacular. “Reserve levels” – as in, “leaving more reserves on the Fed’s balance sheet” – sounds mundane. In plain-speak, this is simply the amount of money the Fed printed and will leave in the financial system or risk crashing the stock market.

I suggested in the January 13th issue of my Short Seller’s Journal that the Fed would likely halt QT: “The economy is headed toward a severe recession.  I’m certain the key officials at the Fed and White House are aware of this (perhaps not Trump but some of his advisors). I suspect that the Fed’s monetary policy will be reversed in 2019. They’ll first announce halting QT. That should be bad news because of the implications but the hedge fund algos and retail day-trader zombies will buy that announcement. We will sell into that spike.”

Little did I realize when I wrote that two weeks ago that the assertion would be validated just two weeks later. When this fails to re-stimulate economic activity, the Fed will eventually resume printing money.  Ultimately the market will figure out that it’s a very bad thing that the only thing holding up the stock market is the Fed.

The policy reversal by the Fed reflects panic at the Fed. Nothing reflects “Fed Panic” better than the price of gold:

http://investmentresearchdynamics.com

*********

Dave Kranzler spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, he traded junk bonds for a large bank. He has an MBA from the University of Chicago, with a concentration in accounting and finance. He currently co-manages a precious metals and mining stock investment fund in Denver. My goal is to help people understand and analyze what is really going on in our financial system and economy. Dave publishes the The Mining Stock Journal a bi-weekly subscription newsletter that features junior mining ideas as well as relative value ideas in large cap mining stocks.

 

Gold was first discovered in U.S. at the Reed farm in North Carolina in 1799, a 17-pound nugget.

Gold Eagle twitter                Like Gold Eagle on Facebook