Gold and silver are trading slightly down in the early part of Monday as the marketplaces of the world are fairly quiet in the lead-up to the latest Federal Open Market Committee meeting which is set to kick off tomorrow morning. Every FOMC meeting is important, but this one holds a particular level of significance due to the fact that the fate of monetary policy in the United States may be decided by it. For this reason investors and market watchers are doing less buying and selling and taking part in much more speculation. The outcome of this meeting could be significant for precious metals which means those interested in or invested in gold and silver will need to watch this meeting and its outcome very closely. We will also take a look at Asian and European stock markets as they are both coming off of disappointing last weeks.
FOMC Meeting and Subsequent Speculation
Tomorrow morning we will see the Federal Open Market Committee begin their latest meeting which will conclude sometime in the afternoon on Wednesday. After the meeting Ben Bernanke, Federal Reserve chairman, will have a press conference and likely reveal all that was talked about and/or decided during the meeting. Many indicators are pointing in the direction that insinuates a shift to current monetary policy in the US might be announced sometime Wednesday. This is in no way a guarantee, but investors and market watchers are convinced that Quantitative Easing might be done away with sometime soon.
Quantitative Easing is constituted by the Federal Reserve pumping millions and millions of dollars into the economy each month. This large-scale dumping of cash into the economy works to devalue the US Dollar and thus make our exports cheaper. An increase in exports is supposed to improve the overall economic situation which many believe it has done in the United States. A popular thought supporting the winding down or complete abandonment of QE says that our economy has improved considerably since the financial and economic collapse of 2008 and that such large-scale pumping of cash into the economy is not necessary anymore.
The Wall Street Journal reported on the situation and they believe that the FOMC will decide on a tapering off of the QE policy. This tactic will not shock the market as much as a sudden, complete abandonment of QE would. Tapering off QE could also help preserve the low interest rates that are presently in effect in the United States. We will just have to wait until Wednesday afternoon to see what the actual outcome of the meeting will be.
Looking Ahead
As you are probably well aware of, the main thing that investors will be looking forward to this week is the FOMC meeting. Even though this is a US-based entity and meeting, investors and market watchers from all over the world will be tuning in to what is said. The US economy dictates what much of the rest of the world does economically, which is why the FOMC meeting is more of an international event than many people know.
The US Dollar index is firmer on Monday than it was for the majority of last week. This is most likely due to some short-covering by investors after the greenback hit a multi-month low on a few occasions last week. Finally, there are two economic reports due out on Monday in the US, one is the Empire State manufacturing index while the other is the latest housing market index. Neither stories are expected to shock the marketplace too badly and thus will likely have little to no impact on precious metals.
