Fed Statement is Laughable: The Precious Metals Consolidation is Over

I haven’t written anything about the markets in a very long time due to the experience in extreme boredom that they have become as of late.  The election came and went and now that we are just ahead of the Holiday Season the apathy has hit monumental proportions.  More significantly, what was the point of doing anything ahead of today’s Fed meeting?  There wasn’t any and so nobody did.

Now that the announcement is out, I think in retrospect today will turn out to be a meaningful turning point.  Not so much because of what they said, but because of where certain markets are and because of what they didn’t say.  Let’s start with the latter point.

From the statement, we found out that the Fed is set to launch an unsterilized buying program of $85 billion per month ($40 billion in mortgage backed securities and $45 billion in treasuries).  This part was widely flagged already.  The more interesting part is the language in the text discussing how the Fed will essentially link their low rates to unemployment, with 6.5% being the threshold.

This is all within a text that attempts to portray a very benign and healthy economy, one described as having an improving labor market, a housing recovery and anchored inflation expectations.  Sounds pretty good to me; so then why accelerate the aggressiveness of their radical money printing policy?

The answer is that the Fed realizes its policies haven’t worked and are convinced they need to do more and more to prove an academic point that man is indeed more powerful than nature.  At first, they said a stock market rally would set a fire under the economy.  That hasn’t worked.  Then they said a new housing recovery would do it.  Once again, nein.  So now their answer is just print money like crazy and eventually it will work.  Yes, they are insane, but we already knew that didn’t we.

Actions always speak louder than words and their actions demonstrate a deep concern for the real economy and an unspoken understanding that things are not going well underneath the layers of propaganda.

Now onto the second point.  I think today will mark an important turning point in the markets not just because of what I wrote above, but because of where things stand.

Precious metals have now been in a major consolidation phase for well over a year, and despite repeated attempts to break them, they have always come back strongly.  For gold to make it through 2012 (a hugely important election year) with a 10% gain is a testament to the strength of the market.   I anticipate that gold will outperform the broad stock market by at least 25%-30% over the next six months to make up for lost time.  Take a look at my favorite chart of the Dow Jones vs. Gold.  It is very overbought and I think ready for a major fall.

Dow/Gold Two Year Chart

Remember that election years have been bad for gold even in the context of the great bull market, with the gold price -5% in 2000, +5% in 2004 and +6% in 2008.  This in the context of a gold price that went up more that 3x from 1999-2008.

For precious metals bulls, I think the long wait for the next leg higher is over and today’s  pathetic statement from the Fed will serve as the catalyst.  As always, we shall see.



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  1. The Fed is a one trick pony. They only have one plan – Create money out of thin air. Anyone with proper brain activity should already be out or well on their way. When TSHTF at some point it will be too late then. Get you and your money out out out. Every dollar they create from thin air is one they steal right out of your pockets. Enough is enough.

  2. The markets are no longer responding. Anybody with half a brain knows the system is rigged and fraud is systemic. People are still in the game because the music hasn’t stopped yet, but they are anxiously eyeing the dance floor to see who feints first. Once the rush for the exit begins, it will be breathtaking to watch the trampling hordes. If your money isn’t out out out by now, you will soon be dead meat.

  3. Yup. Gold and silver rocketing. In all seriousness, there’s no way they are going to let go of the paper manipulation right now. And China is all too happy to accumulate.

    The ONE THING all you blogs missed–and it is SO obvious–is that the entire annoucement by the Fed that they’ll begin to TIGHTEN with 6.5% unemployment or under is to merely give the appeaance it won’t be QE Forever. Why was this done? We know they don’t want the dollar to rise. So why would they announce this less that easy policy stance?

    One reason. One reason only. To try to keep a lid on gold and silver prices by keeing people at bay and to give a plausable explanation why those paper markets will CONTINUE TO GET TOTALLY BOMBED OUT. Yes, I know. Many willl say see–they’re losing control.

    But one thing is 100% certain–you guys continue to underappreciate the fight in the status quo power structure. They’ve got more coming at ya. Guaranteed.

    It’s why every non-sense predication has been way off for two years–when will you guys learn to stop making predications in computer controlled markets for now? It will continue to be this way until the paper markets truly get overtaken. You’re a ways from that boys. And therefore, you’re a ways from any predications looking remotely right for awhile yet again. (See Sprott sourcing 345,000 million dollars in silver with no problem recently).

    How many times we gotta hear gold and silver is ready to rocket? Let’s just stick to the reason to own sound money premises and let the markets someday just take care of itself would we?

  4. When is that big rally in miners suppose to happen again ? 2010? 2011? 2020?? As they say about predictions.. when you live by the crystal ball you get cut by glass.. i agree with NIC the manipulation is coming from the top of the pyramid..QBamco latest said that the conspiracy might as well be from ASIA.. they are buying it so they have the biggest axe to grind keeping it low priced..why not be a Maniac and just smash gold at 3am on globex like they do every day to drill stops and demoralize longs and then have bids scaled in to buy it all back and more ..over and over and over till most give up ..and if FED etc knew they would laugh and say thanks for letting gold not be $4500

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