As per usual, gold & silver are immediately sold into the release of the statement…
One hour in, and we are still in the knee-jerk reaction with downside pressure on the metals:
The knee-jerk reaction is often times not the eventual direction of the move, and in the case of gold & silver, the fundamentals say this is a dip-buying opportunity.
The Fed just lowered interest rates.
Here was the reaction the moment the news hit the tape:
I don’t think this lasts long.
In part because the dollar popped on the news:
Although there is nothing dollar bullish about what the Fed just did.
Why is that?
Because by lowering interest rates, the Fed has reverted to “loose” monetary policy, even though it was never really “tight” to begin with, and loose monetary policy, by default, is weakening the dollar.
In part because they’re looking to create new dollars by expanding credit, but since we have a fractional reserve banking system, that newly issued credit is created out of thin air.
In other words, by inflating the amount of dollars, the Fed is devaluing them, and gold & silver are the hedges against a devaluing dollar.
Here’s the Fed’s statement for those who can stomach it (bold added for emphasis).
Information received since the Federal Open Market Committee met in June indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although growth of household spending has picked up from earlier in the year, growth of business fixed investment has been soft. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 2 to 2-1/4 percent. This action supports the Committee’s view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective are the most likely outcomes, but uncertainties about this outlook remain. As the Committee contemplates the future path of the target range for the federal funds rate, it will continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.
In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.
The Committee will conclude the reduction of its aggregate securities holdings in the System Open Market Account in August, two months earlier than previously indicated.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; James Bullard; Richard H. Clarida; Charles L. Evans; and Randal K. Quarles. Voting against the action were Esther L. George and Eric S. Rosengren, who preferred at this meeting to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent.
The Fed is telling us:
- The labor market is strong
- Economic activity is on the rise
- Job gains are solid
- The unemployment rate remains low
But, they’re concerned about the global economy and that inflation is just too dang low, so they just had to cut interest rates!
Let that sink in for a moment along with this thought: They are forcing US dollar savers to become losers for saving their hard-earned debt-based fiat currency.
Said differently: The Fed wants to destroy our savings.
Here are the changes from the last statement, otherwise known as “the red line”, courtesy of ZH:
Catch the replay of the Powell Presser right here:
Wasn’t the Fed just touting “the Fed Listens”?
What’s the bottom line for today?
Gold & silver were sold into the release.
Gold & silver are always sold into the release.
I don’t think the selling pressure remains for long, however, and I think that any pressure applied to gold & silver will be short lived.
The Fed is determined to devalue the dollar at a rate of 2% per year.
We all know inflation is much higher than 2% right now, yet with a straight face, the Fed says it is lower than 2.0%.
President Trump also says with a straight face (via Twitter) that inflation is “very low”.
The Fed has been talking about this rate cut as “insurance”.
What’s insurance against the Fed?
Gold & silver are.
– Half Dollar
About the Author
U.S. Army Iraq War Combat Veteran Paul “Half Dollar” Eberhart has an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill. Paul dived into gold & silver in 2009 as a natural progression from the prepper community. He is self-studied in the field of economics, an active amateur trader, and a Silver Bug at heart.