The FOMC Statement Is Bullish For Gold And Silver

MBA, Market Analyst & Author @ The Mining Stock Journal
November 5, 2021

While the Fed announced the start of its long-threatened taper program, the actual policy statement says “The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals” (FOMC Policy Statement).  In the press conference following the meeting, Jay Powell confirmed that tapering could be limited to just November and December.  This is why the Nasdaq shot up 149 points shortly after the release of the policy statement. It’s also why gold and silver spiked up sharply after enduring the customary paper gold price take-down on the Comex in the hours leading up to the release of the policy statement.

The economy is growing weaker by the day. Any kind of “growth” in the recent stream of economic reports is attributable to price inflation rather than “unit” growth. As an example, the factory orders report for September earlier this week showed a 0.2% increase over August in the total value of factory orders – $515.8 million in September vs $514.6 million in August. But using the monthly inflation rate of 0.2% in September from August per the CPI report, the real “unit” growth in factory orders was zero. Applying a real inflation rate would produce a decline in the value of factory orders in September from August.

[Today’s employment report was boosted considerably the 363,000 jobs attributed by the highly questionable, if not entirely non-credible, Birth/Death model. Real hourly earnings declined nearly 1% YoY]

The Fed is primarily concerned with keeping the banking system propped up and, secondarily, keeping the stock market from crashing. It’s a good bet that continued signs of economic weakness will give the Fed “cover” to halt its taper schedule after December. The FOMC next meets on December 14-15th. After that at the end of January so maybe the taper goes on for three months. Once the Fed stops the taper, or reverses and starts printing more money, the gold, silver and the mining stocks will do a moonshot.

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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.

 

The term “carat” comes from “carob seed,” which was standard for weighing small quantities in the Middle East.

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