Gold & Silver Volatile on Fed Rate Moves, Interventions

The Federal Reserve announced another rate cut and another round of Quantitative Easing on Wednesday.

The mainstream called this quarter-point reduction in interest rates “a hawkish cut.” We have to wonder if that’s akin to jumbo shrimp? Or government intelligence?

And if this is hawkish, we wonder what will happen when the Fed people turn dovish!

The CNBC report on the December Fed meeting was typical.

It reported that the FOMC voted 9-3 to trim rates to a range between 3.5 and 3.75 percent. It highlighted the so-called dot plot projecting just one cut in 2026 and another in 2027.

And then buried 19 paragraphs in, the report mentions that the Fed will resume buying Treasury securities starting now. This means the central bank plans to resume expanding its balance sheet – something known as Quantitative Easing!

According to Fed officials, the central bank will purchase $40 million in Treasury Bills today... and going forward, purchases will “remain elevated for a few months” before they are “significantly reduced.”

Of course, you will not hear any central banker or mainstream pundit utter the words "quantitative easing."

In fact, if pushed, they’ll almost certainly deny that they’re doing it. They’ll call it reserve management or tell you they’re engaged in technical operations to keep the financial system’s plumbing moving.

In practice, the Fed plans to start buying Treasury bills with money created out of thin air. This will increase the money supply and put downward pressure on Treasury rates. The balance sheet will grow; liquidity will increase; risk asset bubbles will get more air. This is exactly what QE does – and by definition, this is inflation.

In effect, the Fed supersized its rate cut while still maintaining a somewhat cautious stance on further rate cuts.

TradeStation head of market strategy, David Russell, told CNBC the central bankers “threaded the needle" by delivering a modest cut while quietly easing monetary policy even more through the back door.

Not surprisingly, the stock market rallied on the move, thrilled that the easy money punch bowl is going to fill up even faster than they thought. Gold and silver moved up sharply also, although silver has pulled back here today, more on that in just a moment.

I mentioned that pundits are calling this a “hawkish cut.”

What exactly is hawkish about it?

Certainly, nothing that Jerome Powell & Company just did was hawkish.

They cut rates – again. They announced balance sheet expansion.

But Powell did say some things that one might perceive as hawkish... but actions speak louder than words.

To sum it all up, the central bankers at the Fed are revving up the inflation machine while trying to convince YOU they are diligently fighting the inflation dragon.

They made two concrete moves to loosen monetary policy, but they said some things to make you think they might not loosen much more.

The reality is the Fed is in a Catch-22. It simultaneously needs to hold rates higher to deal with inflation and cut rates to try to keep the economy from being completely sucked into the Debt Black Hole. Make no mistake, no matter what you hear coming out of the mouths of Fed officials, they’ve picked inflation.

The bottom line is you need to watch what the Fed people do, and you can almost completely ignore what they say. The open-mouth operations are a deflection as they keep relentlessly devaluing your money.

Lastly here, and before we get to this week’s interview, let’s take a look at the weekly market action, and it has been a wild week.

Gold hit over $4,300 earlier today and threatened the October all-time high, but it has since pulled back a bit. The yellow metal currently checks in at $4,298 an ounce, good for a gain of nearly $90 on the week or a 2.1% gain.

Turning to silver, it actually eclipsed $64 earlier today but has since reversed in what has been a long-anticipated pullback. Despite that pullback silver is still up over $3 an ounce or 5.7% as of this Friday late morning recording.

Turning to the PGMs, which will be the subject of our upcoming interview, platinum is a cool $100 or an even 6.0% to check in at $1,753 an ounce. Palladium is up as well, gaining 3.0% since last Friday’s close to trade at $1,522.

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