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Precious Metals Surge Ahead Of Today's "Uneventful" FOMC Meeting

Tyler Durden's picture


As soon as the much-weaker-than-expected GDP print hit the tape this morning, precious metals began to rise. Led by Silver, it appears the physical demand of recent weeks is creeping into the reality of prices (suppressed or otherwise) as bad is good enough for moar help from Ben and his buddies. The upward move in the PMs is as good a predictor of what to expect (i.e., not even a hint of tightening) as the sell-side crew, which is expecting merely another boring FOMC statement.


Via Goldman Sachs,

  • After substantial policy changes announced at the December FOMC meeting - including a shift to outcome-based forward guidance and the introduction of open-ended Treasury purchases - the January meeting will likely be relatively uneventful.
  • We expect few changes to the statement, with the economic assessment relatively unchanged. Any changes to the language around Treasury and MBS purchases may be important clues about future balance sheet policy.
  • With 4 new voters for 2013, we see some risk that St. Louis Fed President Bullard or Kansas City Fed President George will dissent, although we do not see this as a foregone conclusion.

Following the substantial policy changes announced in December - including the shift to outcome-based forward guidance and the introduction of open-ended Treasury purchases - the January meeting will likely be relatively uneventful. Although data surprises according to our US-MAP have on net been negative over the inter-meeting period, we expect few changes to the economic assessment.

Overall, the data appears consistent with a modestly below-trend rate of GDP growth heading into Q1, while inflationary pressures remain very subdued. In terms of specific changes to the statement language, we expect that:

  1. the reference to "weather-related disruptions" (i.e. Hurricane Sandy) will be removed,
  2. the characterization of business fixed investment may be improved slightly, and
  3. the statement that "the Committee views these [outcome-based] thresholds as consistent with its earlier date-based guidance" will be removed.

At some point, strains in global financial markets will no longer merit mention as presenting "significant risks to the economic outlook"—which has been included in the statement since September 2011— especially in light of the substantial easing in financial conditions which occurred since late December and the generally better state of financial conditions relative to that seen the last time the language was adjusted. However, we think the Committee will continue to err on the side of caution and retain some version of this language.

The statement will probably not "push back" on the markets' more hawkish read on the December FOMC minutes, which noted that several members favored ending securities purchases well before the end of 2013. Although we believe that none of the FOMC leadership fell into this group, the risk-neutral market-implied path of the fed funds rate rose since the December FOMC (Exhibit 1), while longer-dated Treasury yields increased by around 30 basis points, consistent with reduced expectations for the ultimate stock of QE purchases. While the minutes will probably provide more forward looking color, any changes to the language around the Treasury or MBS purchases programs may provide important clues about future balance sheet policy. With Treasury purchases under the new regime already underway, the statement that Treasury purchases would "initially" occur at a pace of $45 billion per month will have to be adjusted. If "initially" is replaced with another modifier such as "at the present time" rather than deleted, it would suggest downside risks to the size of the Treasury program later this year. While we believe that QE thresholds may be announced at some point this year, we would be very surprised to see them at the January meeting.


The January meeting will also welcome a new crop of regional Fed presidents as FOMC voters; James Bullard (St. Louis), Charles Evans (Chicago), Esther George (Kansas City), and Eric Rosengren (Boston) will replace Jeffrey Lacker (Richmond), Dennis Lockhart (Atlanta), Sandra Pianalto (Cleveland), and John Williams (San Francisco).

(Via Bloomberg Briefs)

Both Evans and Rosengren have been known for dovish views in recent years, as Evans was the first Fed official to propose outcome-based thresholds for the forward guidance (the "Evans rule"), and Rosengren suggesting a similar policy for QE. On the other hand, both Bullard and George have made more hawkish public statements in recent months, with Bullard noting that he would have preferred a smaller monthly rate of QE purchases (although supporting the program in concept), and George focusing on the role that monetary policy may play in creating financial imbalances.

(Via Bloomberg Briefs)

Despite this, we think there is at least a 50/50 probability of no dissents at the January meeting. The risk to this view is the considerable institutional momentum behind dissent at the Kansas City Fed, as their board of directors has consistently voted for an increase in the discount rate to 1%, and George's predecessor opposed every FOMC decision when he last voted during 2010.

In addition to the FOMC statement, the Fed will publish its annual Longer-run Goals and Policy Strategy document. This is essentially a specific statement of the Committee's interpretation of its monetary policy mandate, which is described only in general terms in the Federal Reserve Act. Most notably, the Fed made explicit last year that it sees 2% inflation over the longer-run (as measured by the headline PCE price index) as most consistent with its statutory mandate. We expect few or no changes to this statement relative to last year.

However, in light of the change to outcome-based thresholds for the forward guidance, the strong statement that "it would not be appropriate to specify a fixed goal for employment" does seem a bit dissonant, something alluded to in the December minutes as well. More generally, the statement of Longer-run Goals and Policy Strategy may be amended slightly to reflect recent innovations to communications policy.

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Wed, 01/30/2013 - 14:31 | 3199498 VonManstein
VonManstein's picture

TSY to be sold regardless

Wed, 01/30/2013 - 14:45 | 3199553 NotApplicable
NotApplicable's picture

I just love these horse race style pink sheets, as it presents such dramatic visions of what may come to be, when we all pretty much know they've very few real choices, none of which are painless.


Wed, 01/30/2013 - 15:06 | 3199657 Panafrican Funk...
Panafrican Funktron Robot's picture

I'm particularly amused by that graph showing Fed rates going up at any point in the future.    

Wed, 01/30/2013 - 14:50 | 3199582 Silver Bug
Silver Bug's picture

Gold and Silver are going much much higher.



Wed, 01/30/2013 - 15:11 | 3199687 Thomas
Thomas's picture

The metal-based equities are so damned stuck. Somebody has to be pair trading them into the basement.

Wed, 01/30/2013 - 15:19 | 3199709 Quinvarius
Quinvarius's picture

That isn't going to last too much longer.

Wed, 01/30/2013 - 16:11 | 3199978 VonManstein
VonManstein's picture

damn right

Wed, 01/30/2013 - 14:33 | 3199508 unrulian
unrulian's picture

Maples Bitchez

Wed, 01/30/2013 - 15:05 | 3199651 GubbermintWorker
GubbermintWorker's picture

Nah, LIbertads bitchez! Maples scratch too easy, have a likeness of an old hag,  and Libertads have boobies!

Wed, 01/30/2013 - 15:05 | 3199652 GubbermintWorker
GubbermintWorker's picture


Wed, 01/30/2013 - 15:37 | 3199510 Kaiser Sousa
Kaiser Sousa's picture

the only 2 forms of real money havent even begun to shine like they will...

sound money comrades -





Wed, 01/30/2013 - 14:35 | 3199514 Dr. Richard Head
Dr. Richard Head's picture

Fuck all of those Fed monkeys. 

Wed, 01/30/2013 - 14:36 | 3199521 Dr. Richard Head
Dr. Richard Head's picture

Even the supposed Hawks that politispeak against further easing, while still advocating a master central planner.  Fuck them all till their arse bleeds.

Wed, 01/30/2013 - 14:41 | 3199542 gmrpeabody
gmrpeabody's picture

Are you really a doctor...?

Wed, 01/30/2013 - 14:44 | 3199555 Cognitive Dissonance
Cognitive Dissonance's picture

That is what he tells the girls in...................nevermind. :>)

Wed, 01/30/2013 - 14:55 | 3199604 Dr. Richard Head
Dr. Richard Head's picture

No, but I am a dick head.

Wed, 01/30/2013 - 14:59 | 3199621 gmrpeabody
gmrpeabody's picture

And..., you are honest. ;-)

Wed, 01/30/2013 - 15:12 | 3199688 Raymond Reason
Raymond Reason's picture

...and therefore would be unsuitable as a med pusher. 

Wed, 01/30/2013 - 15:23 | 3199742 HoofHearted
HoofHearted's picture

This is a guy I could go out drinking, or shooting, or drinking then shooting...with. My kind of a dickhead.

+ 85 billion per month for Dr. Richard Head

Wed, 01/30/2013 - 14:36 | 3199519 ZeroAvatar
ZeroAvatar's picture

Silver was up a 'good bit' yesterday, as well.  It's just the usual Frontrunning the Fed news scheduled today.  Must be moar printing ahead.

Wed, 01/30/2013 - 14:37 | 3199531 Dr. Richard Head
Dr. Richard Head's picture

$33 is in striking range.  Then we can watch the fireworks being? 

Wed, 01/30/2013 - 14:56 | 3199607 ParkAveFlasher
ParkAveFlasher's picture

There is always "moar printing" ahead.  "When" that happens is just a question of when Ben needs to goose his metrics and/or fend off failures. 

Wed, 01/30/2013 - 15:20 | 3199707 scatterbrains
scatterbrains's picture

as far as I'm concerned (being more visual) The fuel that will push gold higher starting now can be measured in the divergence between the amount they fluffed up the banks while crushing the dollar...   That gap represents some serious catching up in gold (as a pressure release) which will not be denied... bitchezz



Wed, 01/30/2013 - 14:35 | 3199520 Sudden Debt
Sudden Debt's picture

I'd like to order the fried doves and the hawk stew please...with mayonaise...

Wed, 01/30/2013 - 15:21 | 3199721 Raymond Reason
Raymond Reason's picture

...on a silver platter. 

Wed, 01/30/2013 - 14:36 | 3199524 DoChenRollingBearing
DoChenRollingBearing's picture

Just wait until the holders of physical decide not to sell.

That is when PM prices go to the moon (Alice).

Wed, 01/30/2013 - 14:48 | 3199566 KnightTakesKing
KnightTakesKing's picture

Is anyone really selling physical in sufficent quantities? Or is most of the purchases from newly mined gold and silver? I suspect the latter.

Wed, 01/30/2013 - 15:03 | 3199642 DoChenRollingBearing
DoChenRollingBearing's picture

Good observation, but with gold it is the flow that is important, not the stock.  Almost all of the flow, I would guess, is indeed from the mines as you note.

And the flow of gold is VERY LOW compared with all other commodities.  When the flow gets cut, even some, BANG!

Wed, 01/30/2013 - 15:12 | 3199690 silverserfer
silverserfer's picture

paper games will keep price down. remember SLV just wove a nice big new basket to hold massive paper investment by sheeps.  Then of cours as expected they will use the proceeds to short their digleberry asses with. Casino 101 tactics i tell ya.

Wed, 01/30/2013 - 15:25 | 3199756 Raymond Reason
Raymond Reason's picture

Unfortunately those of us without gainful employment are forced to sell some every now and then to keep beans in the pot.  Our ranks will probably grow. 

Wed, 01/30/2013 - 14:38 | 3199525 Cognitive Dissonance
Cognitive Dissonance's picture

Don't worry, the beatdown will commence in 4......3......2.....

<At some point that will no longer work. Then the fireworks will really begin.>

Wed, 01/30/2013 - 14:50 | 3199575 ZeroAvatar
ZeroAvatar's picture

Yeah, we'll get the usual jawboning, "Fed's gonna sell it's holdings soon,"  "we'll need to raise rates any day now", etc.

Wed, 01/30/2013 - 14:38 | 3199529 walküre
walküre's picture

My personal "asset" purchase program may have to intensify and reach near lightning speed. I get this awful feeling that the run has started and the shysters are losing control. So many FRN's, so much demand and supply is getting tight.

Wed, 01/30/2013 - 15:30 | 3199789 Panafrican Funk...
Panafrican Funktron Robot's picture


If you accept the argument that an increase in this number is essentially a decrease in the value of the US dollar (ie., an increase in the total supply of USDs dilutes the value of each USD), it is noteworthy that, due to the unsterilized QE purchases happening in 2013, the value of the USD is expected to drop another 25% (ie., the supply is expected to increase about $1 trillion this year).   

Wed, 01/30/2013 - 14:37 | 3199530 americanspirit
americanspirit's picture

How nice to have all their pictures. I'm a real fan. So how about more info on each of these fine folks - home addresses, type of vehicle, clubs they belong to, etc. You know, personal stuff that true fans love to read.

Wed, 01/30/2013 - 14:49 | 3199572 krispkritter
krispkritter's picture

It's gonna take a r-e-a-l-l-y long list to get all these parasites and pricks named. It's definitely worth doing however so here's a start:


Wed, 01/30/2013 - 14:54 | 3199597 Dr. Richard Head
Dr. Richard Head's picture

If anyone even knows of the county in which these theives live one can do a GIS search by last name to locate their house.  Just google "___________ county _____________ state GIS".  one can then take and google the persons address and can usually find a phone number listing on a document that was placed out there. 

For instance, our county has a sales rep from Redflex ticket cameras take place earlier this week.  The Regional Sales Manager that put on the presentation had his name in the paper.  I did the above steps.  I googled "Lake County Ohio GIS" and then put this fucks name to find property records belonging to his name - Bob Riebe.  I was able to locat his home address of 7955 Forest Valley, Painseville, OH.  From there, I googled his address I was able to locate his phone number (440-352-1995) off of some other website that happen to list his home phone number (which is unublished), as well as his wife's name.

Kind of neat if you think about it.

Wed, 01/30/2013 - 15:09 | 3199670 ZeroAvatar
ZeroAvatar's picture

I see what you did there.  :)

Wed, 01/30/2013 - 14:38 | 3199533 LongSoupLine
LongSoupLine's picture

Fuck all those Fed fuckers.  I don't care what they fucking say, it's what they do and allow to be done.


They're all complicit motherfuckers in the whole fucking transfer of wealth globally.


Fuck off, eat hot shit, die.  fuckers.

Wed, 01/30/2013 - 14:58 | 3199620 Joe moneybags
Joe moneybags's picture

LSL, you raised some interesting points that I have not read here at ZH before.  Thanks.

Wed, 01/30/2013 - 15:02 | 3199640 gmrpeabody
gmrpeabody's picture

Soup seems upset.

Wed, 01/30/2013 - 15:03 | 3199643 LongSoupLine
LongSoupLine's picture

just doing my civic duty as a ZH'er...I love you fucking guys.

Wed, 01/30/2013 - 15:40 | 3199825 Kaiser Sousa
Kaiser Sousa's picture

yeah, u've grown on me too Soup....

Wed, 01/30/2013 - 14:39 | 3199535 firstdivision
firstdivision's picture

Selling paper silver whilst buying paper gold nets more paper paper.

Wed, 01/30/2013 - 14:42 | 3199546 ebworthen
ebworthen's picture


The barbarous relic correlates with the GDP, the value of the dollar, FED QE, and the real economy?

Quick!  Someone tell Becky and Buffet!

Wed, 01/30/2013 - 15:41 | 3199833 silverserfer
silverserfer's picture

 the real question is how big of a cube wold all the paper gold form?

Wed, 01/30/2013 - 14:42 | 3199548 Uncle Zuzu
Uncle Zuzu's picture

I wouldn't say "surge".  To say "surge" you need +3%, at least.

Wed, 01/30/2013 - 14:43 | 3199550 unwashedmass
unwashedmass's picture


Plus we are past the expiry, and there were handshakes all around at JPM and the CTFC. Another month well done, boys!!!!!!

Plus it looks like, if you look thru the Comex inventory, they are more than likely not going to have the metal on hand to meet demand for the actuall hard stuff, not Blythe's paper, in March....so now it is time to fold the tent and start thinking about where to hide when it all blows up. Island anyone? 

Annnnnnnnnnnnnnnnnnd it is now time for them to really dig in and build their personal stashes and hide them.......


that's why the metals are going up. 

Wed, 01/30/2013 - 14:53 | 3199591 youngman
youngman's picture

they will just take your share of GLD or SLV that you think you owned but that they have in their vaults...you bought it..they took it

Wed, 01/30/2013 - 15:42 | 3199842 silverserfer
silverserfer's picture

I dont think you need a vault for paper silver tho.

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