SD Outlook: The Fed is not in the position to offer a “pandemic insurance rate cut”. Here’s why, and here’s what it means for the markets…
First things first.
Here’s Fox News demonstrating its priorities this morning:
I mean, sure, it’s a tragedy, but how many people are killed in crashes each year?
A young US Army soldier just died in Syria in a vehicle crash:
That’s the real tragedy here, and the loss of the real hero.
And if the US Embassy in Baghdad was indeed attacked over the weekend as reported by CNN and other MSM outlets, then tragic news such as the loss of US Military lives will only increase from here.
A scan of the US government’s CENTCOM and DOD websites, however, shows the government has yet to make a statement on the attack.
Regardless, not only is the Middle East not de-escalating, but the problems seem to be mounting.
And that’s only one of the worries in the world right now because, well, unless you’ve been living under a rock, there’s that bat-flu thing going on that’s all the rage.
There’s also that impeachment thing going on.
And gold & silver are bid for reasons like these.
The fundamentals are re-asserting themselves back into the prices of the precious metals.
But wait, there’s more!
Throw-in a 2-Day FOMC Meeting, beginning on Tuesday and ending with the Wednesday presser at 2:30 p.m. EST, and we’ve got the mix for quite a volatile week in the “markets”.
The DOW could start puking in anticipation of no “rate cut”, because right now there’s zero probability of that happening:
There’s even the probability of a rate hike on Wednesday, and while small, it does go to show that on the surface, the bias would be to raise rates as opposed to lower them.
The question is, does the Wuhan Coronavirus give the Fed the ammo it needs to cut rates, and if it does, what does that mean about the seriousness of the Wuhan Coronavirus situation?
Because the World Health Organization and the CDC seem to be downplaying the seriousness of the Wuhan Coronavirus, so how could the market riggers at the Fed justify loose monetary policy by something that the supposed premier authorities on matters of public health are, at this point, minimizing?
In fact, the last public WHO statement about Wuhan Coronavirus was last Thursday, January 23rd!
Here’s the problem: Governments and central banks around the world, the US government and Fed included, have been attempting to manipulate anything and everything, and, for the most part, they have been successful in doing just that, however, said governments and central banks directly work against the people, mainly by using lies and deceit but sometimes brute force, and yet, we’ve come to the point where it is no longer possible to cover the lies and deceit by their traditional means of using lies and deceit, with the Wuhan Coronavirus being the case in point.
In other words, if Jerome Powell is asked about the Wuhan Coronavirus on Wednesday, which he will likely be asked about, albeit with watered-down questions fit for a Kindergarten Teacher, how can the Fed look to the Wuhan Coronavirus as a concern and reason for loose monetary polity all the while the the Government (CDC) comes across like the Wuhan Coronavirus is no big deal beyond simple monitoring?
My point here is that some people may be thinking the Wuhan Coronavirus gives the Fed the cover it needs to cut rates on Wednesday, as if the Fed is somehow undecided and not working off of its script, but in my opinion, the Fed can’t cut rates because of the Wuhan Coronavirus.
You see, a “pandemic insurance rate cut” would essentially be a vote of “no confidence” in the US government in general, and the CDC specifically, especially when the CDC said just yesterday, on January 26th, that “the immediate risk to the U.S. general public is low at this time”.
Therefore, in my opinion, Powell will simply state that the Fed is “monitoring the situation and the impacts it might have in regards to the Fed’s dual mandate or symmetrical 2.0% inflation objective”.
And there-in lies the problem, no pun intended.
The government for sure and very likely the Fed this Wednesday have chosen to downplay the seriousness of the Wuhan Coronavirus.
Smart money, however, understands the underlying fundamentals, so gold & silver were bid at the open on Sunday evening:
The cartel is in quite the pickle.
The gold-to-silver ration could be in the 70s by the end of the week:
Silver has a ton of catching-up to gold to do.
In fact, gold is setting up to do battle at $1600:
A dovish Fed, even without a rate cut, may be just the catalyst to break-out.
We could be talking about $20 silver by the end of the week:
For fundamentals reasons too, even though the technicals are supportive of a rally right now.
Palladium is in a healthy pullback right now:
If the commodities in general continue crashing, as you will see below, we could see palladium pullback to the 50-day moving average sooner than later, but adding a short position here, in my opinion, is not a good move because palladium’s action is being driven by a physical supply shortage.
Platinum continues to consolidate at $1000:
Sure, it looks like we’ve broken to the downside from that short-term wedge, but I don’t think the breakdown lasts long, especially if gold & silver begin to rally.
The problem “traders” and “investors” are likely facing right now is that the commodities are plummeting, so people may be thinking gold & silver are going to crash right along with them.
I mean, check out copper:
Copper is down over 9.0% in 7 days.
Crude oil, however, is absolutely puking its guts out:
In just a couple of weeks, we’ve gone from the WWIII fear premium to a bear market!
And so it’s easy to see why there’s going to be, if there is not already, one epic “wall of worry” for gold & silver.
All of the developments from this weekend don’t bode well for the US stock market:
That bearish-engulfing candle is looking all sorts of scary for the bulls too!
It looks like the third time will be the chart with the VIX:
If the Wuhan Coronavirus turns into a full-blown pandemic, the VIX is going to be off the charts!
All of this is great news for the US government’s borrowing habit:
Because yields will fall back down in a hurry, just as the governments needs to happen.
You can already hear the cries for the US dollar as a “safe haven”:
The Wuhan Coronavirus (and the Middle East tension) will be fought with money printing, however, which is highly inflationary.
What’s the bottom line as we find ourselves here this beautiful Monday in late January?
Stock market bulls are likely hoping the Wuhan Virus is cover for the Fed to cut.
Yet the government has chosen to downplay the potential risks to the US.
So the Fed will be forced to downplay the potential risks as well.
Smart money, however, understands something’s not right.
And they’re moving into what works in uncertain times.
That is, they’re moving into the safety of metal.
Gold & silver could get moving this week.
As could a lot of different “markets”.
The cartel wanted to smash.
As China closes down.
Can they smash?
– 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.