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Monetary Stimulus Chatter Getting Louder

ByGoldMoney News Desk
Published 08/01/2012, 07:04 AM
Updated 05/14/2017, 06:45 AM
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It’s all about the Federal Reserve and the European Central Bank over the next 24 hours as far as gold and silver are concerned (plus ça change, some might retort). Later today Ben Bernanke will give a press conference outlining the Federal Open Market Committee’s latest conclusions on the US economy. Aside from reiterating the Fed’s commitment to low rates, some are speculating that Bernanke will give clear signals about plans for a new round of quantitative easing.

Dan Norcini argues that with the stock market still climbing higher and US Treasuries at or close to record low yields, the Fed is unlikely to act just yet. In his words: “why mess with things if the market is doing what you want it to do without taking any additional steps such as another round of bond buying?” He also points out that the Fed has to walk a fine line between being seen as a credible “last resort” market backstop, and a wild cheerleader for said markets. Bernanke can ill-afford to be seen as a glorified hedge-fund errand boy.

Firm signals of more QE probably won’t come until the annual meeting of central bankers in Jackson Hole, Wyoming later this month, or until the conclusion of the FOMC’s next meeting on September 12-13. So gold and silver bulls may have a little while longer to wait before these metals start marching decisively higher.

As ever, the ECB is a little harder to read. We all know the basic dynamic, which applies to every major central bank: inflate or die. German sensibilities, however, dictate that the ECB do so in a less blatant manner than the Anglo-Saxons – something that Ed Yardeni thinks may be starting to try Mario Draghi’s patience. Is Draghi “going rogue”?

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