Ignore The Fed’s DoubleSpeak And Get To Gold
Jun 21 2013
If there is one thing I’ve learned in my years of watching over the gold (GLD) and equity markets since Ben Bernanke took over as Chairman of the FOMC it is to ignore nearly everything said and focus on the reaction by the markets. Wednesday’s statement contained nothing at all worth remembering no less reacting to but the markets have reacted badly to this nothingness as if it is the end of the Fed’s coming to its rescue. So, what does this mean for gold?
In the short term it means that there will be more volatility, possibly more action to the downside. Why? Because there is a growing lack of liquidity in the markets and gold is always sold during liquidity stress, which is why buying now is the right play.
This liquidity seizure may have begun in China over the PBoC s desire to break the shadow banking system and unwinding the literal mountain of copper collateralized financial contracts. It may have its roots back in Cyprus and the rush to physical gold that ensued after the depositor impairment scheme created the cascading assault on gold in mid-April, the fallout from which we are still dealing with. But, the one thing it is not being caused by, as I will show with one simple chart, is the Fed backing off from its asset purchasing program.
How Do You Know a Fed Chairman is Lying…