Gold and silver dropped to a new 5-week low in the early parts of Wednesday ahead of the release of the latest FOMC minutes. While the minutes’ release is the marquis news story of the day, there are also plenty of economic reports due out today as well.
As gold continues to decline many investors are hoping that today’s news will help give precious metals bulls momentum while stripping it away from the bears who have been in control for the past few weeks.
FOMC Minutes, James Bullard to Speak
The Federal Open Market Committee is an arm of the Federal Reserve tasked with developing and maintaining monetary policy in the United States. For the past few years the dominant monetary strategy employed by the FOMC is what is known as Quantitative Easing. QE is an initiative that sees the government buy up billions upon billions of dollars worth of bonds each and every month. The purchasing of bonds translates into more money being pumped into the US economy and is supposed to translate into increased economic growth. Up to this point, most would agree that QE has thus far done a good job, on the other hand however, there is a strong contingent who believes that QE has not yet fulfilled its purpose and is still necessary to preserve and hopefully grow the strength of the US economy.
For the past few months it has been a hotly debated topic; whether or not to reduce Quantitative Easing. The side supporting the reduction (or tapering) of QE holds that the monetary policy has done all it could have possibly done and is no longer needed. These same people view QE as a type of unnecessary crutch which the US economy has relied and will continue to rely upon for all of its strength. The other side of the coin, however, exhibits a strong belief that QE should be retained to further economic growth and reduce the unemployment rate. In fact, Janet Yellen, Ben Bernanke’s likely replacement as Federal Reserve chairperson, spoke recently about her support of Bernanke’s QE policy. Most market experts agree with this side of the argument which is why many people are not expecting today’s FOMC minutes to yield any major, telling clues about monetary policy’s future in the United States. Nonetheless, investors from across the globe will be paying attention to the FOMC minutes and scrutinizing and analyzing every last word.
Also scheduled for today is a speech by the president of the St. Louis Federal Reserve bank, James Bullard. Mr. Bullard, who is a known supporter of the retention of QE, will likely make comments and justifications for why he and his colleagues feel that Quantitative Easing is a necessary policy to keep intact. All of this Fed activity stands the chance to move the spot values of gold and silver, though we will have to wait until Mr. Bullard speaks and the minutes are released until we see which direction metals head in. If the minutes offer no substantial clues with regard to Quantitative Easing’s future and James Bullard speaks in favor of keeping Quantitative Easing in tact, today might just end up being a positive one for gold and silver.