Gold and Rising Interest Rates: Selling the Rumor, Buying the Fact

The Federal Reserve is widely expected to nudge interest rates up again this week. Most analysts agree that the specter of a rate hike is one of the primary reasons gold has slumped over the last several weeks. But are rising interests rates really bad for gold?
The short answer is no. At least not historically
Conventional wisdom holds that tighter monetary policy tends to increase bond yields and boost earnings. That makes and bonds more appealing to investors, theoretically lowering the appeal of gold and silver. So, when the Fed starts talking rake hikes, the air generally comes out of the precious metals markets.
But consider this: the Fed started raising interest rates two years ago. With the rate a full 100 basis points higher than it was in December 2015, gold is trading at nearly $200 per ounce higher than it was then. That’s more than a 15% increase.
As a recent Bloomberg article pointed out, when it comes to rate hikes and gold, the reality tends to be sell the rumor, buy the fact.

This post was published at Schiffgold on DECEMBER 11, 2017.

Fed Balance Sheet Shrinks By $2.5 Billion (Starts Resembling a 30-year Mortgage)

This is a syndicated repost courtesy of Snake Hole Lounge. To view original, click here. Reposted with permission.
The New York Federal Reserve has released their weekly SOMA (System Open Market Account) report. And as of December 6, 2017, SOMA has declined by $2.5 billion. To $4.2 TRILLION.

This post was published at Wall Street Examiner by Anthony B Sanders ‘ December 7, 2017.

Asian Metals Market Update: December-7-2017

Focus of the markets is on US November nonfarm payrolls tomorrow. Next week is the Federal Reserve meeting, the European central bank meeting and the Bank of England meeting. The European central bank’s tapering view for the first quarter of next year can shake the markets. I do not expect the Federal Reserve to cause any furor. The new Federal Reserve chairman in February could be the bartender for global financial markets.
The US dollar could weaken if there is any indication that US payrolls (NFP) could consolidate in a 160,000-230,000 range for the next few months.

This post was published at GoldSeek on 7 December 2017.

Cometh The Hour, Cometh An Insane Cash-Hating Fed Governor – Nobody’s “Goodfriend”

Marvin Goodfriend is not a Fed governor yet, but it’s likely asking far too much to expect US lawmakers to block President Trump’s nomination.
Unfortunately for the American citizenry, Goodfriend (not) has all the establishment credentials which will likely see the nomination rubber-stamped: economic advisor to the White House (1984-5), director of research at the Federal Reserve Bank of Richmond (1993-2005) when he ‘regularly attended meetings of the Federal Open Market Committee”, and currently Professor of Economics at Carnegie Mellon University. Watching the mainstream media’s response to Goodfriend’s nomination gave us a wry smile, as he is being portrayed as conservative. This was Reuters commenting on the news last week…
A former economic adviser in the administration of President Ronald Reagan and research director of the Richmond Federal Reserve Bank from 1993 to 2005, Goodfriend is arguably the most conservative of Trump’s Fed appointments yet. He has been critical of some recent Fed practices including the purchase of mortgage backed securities.
He has also argued that the central bank should invite more oversight from elected officials, including getting a congressional sign off on its 2 percent inflation target and more discussion of how its policy decisions line up with a ‘reference rule.’ Those ideas are likely to find favor among conservatives on Capitol Hill who feel the Fed has accumulated too much influence.
Although some of Goodfriend’s views, which he’s no doubt enthusiastic about implementing, would be disastrous, Reuters argues (our emphasis).

This post was published at Zero Hedge on Dec 6, 2017.

Just How Dangerous Is Trump’s Latest Fed Board of Governors Pick?

Last week, Pres. Donald Trump nominated Marvin Goodfriend to fill a vacancy on the Federal Reserve Board of Governors. When we reported the news, we called him ‘another swamp creature’ – a member of the Washington D. C./Wall Street clan Trump promised to drain away.
We’re not alone in our thinking. In an article on the Mises Wire, Tho Bishop called Goodfriend’s nomination ‘a dangerous act of outright betrayal to Trump’s core constituency of working-class voters.’
It’s true Goodfriend’s views on monetary policy don’t fit in with the current Fed status quo. But that’s not a good thing. Goodfriend isn’t a fan of the conventional radical policy of quantitative easing. He’s actually a proponent of an even more radical policy.
Following is Bishop’s analysis in its entirety.
Donald Trump nominated Marvin Goodfriend to the Federal Reserve Board of Governors, one of the numerous vacancies that have emerged over the course of the past year. While his prior nominations of Jay Powell as Chairman and Randal Quarles as Vice Chair represented a disappointing commitment to the status quo, his selection of Goodfriend is a dangerous act of outright betrayal to Trump’s core constituency of working class voters.

This post was published at Schiffgold on DECEMBER 5, 2017.

Doug Noland: China Initiating a Global Bear Market?

Chair Yellen is widely lauded for her accomplishments at the Federal Reserve. For the most part, her four-year term at the helm boils down to four (likely soon to be five) little rate hikes over 24 months. Most lavishing praise upon Janet Yellen believe she calibrated ‘tightenings’ adeptly and successfully. Yet financial conditions have obviously remained much too loose for far too long. This predicament was conspicuous in the markets this week. A test of a North Korean ICBM that could reach the entire U. S. modestly pressured equities for about five minutes – then back to the races.
Bubble Dynamics are in full force. The Dow gained 674 points this week. The Banks were up 5.8%, the Broker/Dealers gained 4.5% and the Transports jumped 5.9%. The Semiconductors were hit 5.6%. Bitcoin traded as high (US spot) as $11,434 and as low as $9,009 in wild Wednesday trading. Curiously, the VIX traded up 15% this week to 11.43.
It used to be that markets would fret the Fed falling ‘behind the curve,’ fearing central bankers would be compelled to employ more aggressive tightening measures. Not these days. Any fear of central bank-imposed tightening is long gone. There is little fear of anything.

This post was published at Wall Street Examiner on December 2, 2017.

Renovating the Fed

Earnings don’t move the overall market; it’s the Federal Reserve Board…. Focus on the central banks and focus on the movement of liquidity…. Most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets.
– Stan Druckenmiller (hat tip Steve Blumenthal)
The Federal Reserve will soon have a new chair, assuming the Senate confirms Jerome Powell as Janet Yellen’s successor. Yellen’s departure will reduce the nominally seven-member Board of Governors to only three. That may or may not be a good thing, depending on some other events.
In fact, in talking with some of my Fed-watching friends, it appears the world’s most important central bank is about to experience some potentially profound changes – not just in personnel but more importantly in the kind of people who lead it. Those changes could, in turn, have some serious economic impacts; so it’s worth taking a deeper look.
First, let me remind you that early bird rates will expire soon for my Strategic Investment Conference, next March 6 – 9 in San Diego. We’ve received a great response even without announcing all the speakers yet – and I do have some more big names pending. Several people you don’t want to miss are trying to clear their schedules. You can wait to find out who they are, or you can register now and save yourself a few hundred bucks. It should be an easy choice. Everyone who comes always says that my conference is the best. Click here to learn more.
Nonmusical Chairs
Before we get into the impending changes at the Fed, let’s quickly review how the organization works. For some of you this review will be too elementary, but even many sophisticated investment people really don’t have much understanding of the inner workings of the Fed.

This post was published at Mauldin Economics on DECEMBER 2, 2017.

Trump Picks Another Swamp Creature for Fed

Pres. Donald Trump has nominated another swamp creature to sit on the Federal Reserve board of governors.
Marvin Goodfriend does not come from the ranks of politicians. He’s an academic – an economics professor at Carnegie Mellon University. But he’s perfectly suited for the role of central planner. He fits right in with the other central bankers running what investment guru Jim Grant once called ‘the Ph. D. standard’ monetary system, as opposed to the gold standard.
Goodfriend already has ties to the Federal Reserve. formerly serving as director of research at the Richmond Fed
The mainstream media has presented Goodfriend as a challenge to the status quo – a yin to Jerome Powell’s yang. Here’s how CNBC described him.
If President Donald Trump’s nomination of Jerome Powell to lead the Federal Reserve was a way of preserving the status quo, his selection of Marvin Goodfriend for another vacancy is a way of challenging it.’

This post was published at Schiffgold on DECEMBER 1, 2017.

Metals Expert: Gold Breakout on the Horizon

Since pushing above $1,300 in late August and then falling back below that level again in September, gold has been trading within a very narrow range and volatility in the market has remained low. But during an interview on CNBC Futures Now, metals expert Michael Dudas of Vertical Research said he sees a breakout on the horizon.
And he said he thinks the breakout could come sooner rather than later as the December Fed meeting approaches. Federal Reserve actions, along with continued wrangling over tax reform will likely increase volatility. That will spark a breakout. And Dudas said he thinks it will be on the upside.
With this low volatility, we think an event could spark it either way. We think it’s going to spark higher.’
Dudas described the current gold market as ‘eerily quiet.’ Even so, the yellow metal is still on track for its largest yearly gain since 2010.

This post was published at Schiffgold on NOVEMBER 30, 2017.

Asian Metals Market Update: November-30-2017

Gold and silver fell yesterday on a technical breakdown. Gold could consolidate in a wider $1240-$1290-$1360 range for a few months. Questions are being asked to how can gold rise? Two factors can result in gold zooming over the next few months (a) There is a clear indication that global central bankers (including the Federal Reserve) will raise interest rate at a slower pace next year. (b) There is an armed attack by NATO forces in North Korea. I will prefer to use the current correction and further correction (if any) in gold and silver to invest for next year. Option traders can invest in far dated call options in gold and silver. Silver options will be cheaper than gold options. No one is interested in investing in silver. Silver could be the dark horse of next year.
One needs to trade very carefully on the last trading day of the month and first trading day of the month.

This post was published at GoldSeek on 30 November 2017.