Tag Archives: Quantitative easing

Beginning of the end of QE?

The FED started its two day monetary meeting yesterday, and today is the day for the big news, the most important news in a long time, and the market consensus is that the FED will begin to rein in its stimulus program. Investors expect the FED to reduce its bond purchases by $10 billion a month. From $85 billion to $75 billion a month.

This tapering is expected and the equity market may not move so much from here. Nor should the goldprices move so much, because so far in september we have seen a huge sell off in the goldprices. The tapering is largely priced in.

In my TA earlier with the headline: «where is the bottom?», I see a higher high, and a higher low. 50% retracement is at 1307. A great support. I will not be surpriced if the goldprices might rise after the FOMC meeting today.

I will pay attention to the FOMC Statement & Fed Funds Rate today at 2:00pm, and FOMC press conference at 2:30pm. Other important things to follow today: Building Permits at 8:30 and Crude Oil Inventories at 10:30.

Ben Bernanke is using the expected tapering as a way to exit his FED Chairmanchip. To reduce the QE he will argue that his money printing program has a positive impact on the market, and the size of the move is symbolic. So, this is the beginning of the end of quantitative easing?

Nope. The debt is too high. That`s why FED is printing money. They use QE to finance the federal budget deficit. The debt is so high and there is not enough buyers in this world to buy all the bonds. If the FED stopped to buy these bonds by QE, the bond market in the US would crash, and the interest rates would go straight up to heaven!

QE will never end.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Syria and Ben Bernanke

Finally, the Russian and American deal to damage Assads chemical weapons will give Mr Obama a «time out». But is it so easy? I hope so, but the list of what can go wrong is long, extensive and daunting.

What if Assads regime is hiding the chemical weapons stock? What if the international inspectors will be obstructed? Saddam Hussain played cat and mouse game with the international inspectors in 1991. The questions is: Do Mr Obama have a plan B? This case is not finish yet.

Tomorrow and wednesday, Ben Bernanke will have a very important speech. He sayd this on september 11; «Quantitative easing typically refers to policies that seek to have effects by changing the quantity of bank reserves, a channel which seems relatively weak, at least in the U.S context».

The meeting on 17 – 18 september will tell us whether the economy is strong enough to begin tapering $85 billion in monthly bond purchases. If so, they will use a forward guidance to try to convince the investors so they can keep the interest rates low and bring down the unemployment.

Thinking back in time, there is always something extensive and daunting things that could change the game in the market. Unexpected things can always happen and that is very often things that no other was thinking of. So what is the next big thing that will shock the financial market?

The world`s largest gold-backed exchange-traded fund SPDR Gold trust, had their biggest decline since Aug 1. Their holdings fell 0,66% to 911,12 tonnes on friday. Hedge funds and money managers have turned to a bearish sentiment for the first time in five weeks.

The gold price is 1314,80 right now.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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