Well, maybe. Loss of confidence is gold's final obstacle

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Posted on: 12/26/15
Well, maybe. Loss of confidence is gold's final obstacle for higher pricesWHAT did the Fed do Wednesday? asks Gary Tanashian in the Notes in the Rabbit Hole. Why, they rolled over once more and held ZIRP. They also got mighty specific with a few wording"In determining whether or not this will be appropriate to boost the target range at its next meeting, the Committee will assess progressboth realized and expectedtoward its objectives of maximum employment and 2% inflation.

This assessment will require into account an array of information, including measures at work market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments."That freaked out gold and silver players and set in a reversal, with the metals, but importantly, within their ratio.

A reversal in silver vs. gold would place the sector on the correction as well as issue an alert to other global markets. The Fed continues to have a few tricks up its sleeve. But they're backed right into a corner by which they are likely to normalize monetary policy because well, they're they Fed, they've perceived credibility ie, the confidence from the markets with what is largely a confidence game and legions of conventional investors to whom they have to appear reasonably normal.

Here is what they really have, an abnormal distortion that belongs to them creation within the markets; and when you ask me, an out and out disgrace on the hands. The horizontal red dotted line is post2008 monetary policy. This as the S P 500 grew another hump of epic proportions.Looking at yields within the 30 year5 year range lower panel above, we have seen that the Treasury bond marketplace is trying to turn that curve up orange shaded area.

The early stages of these upturns have broken the stock exchange on the last two cycles red. Is this a picture from the 'Bond Vigilantes' overtaking the show out around the curve, far enough away in the Fed influenced short end?The 10yr2yr still looks completely in check and within the grips of unbending confidence within the Federal Reserve.

You can see the shorter duration popping big using the dreaded wording within the FOMC release. The Fed really really means it this time around! Maybe. The alignment in bonds nearer the Fedcontrolled Funds Rate is constantly on the show that all is well, normal, in charge and by the way, antagonistic to gold, which most surely does not need to see short rates rising vs.

long rates. Complicating matters is definitely an appreciating currency, which Fed members are in fact fairly neurotic about. Here, thanks to Bloomberg, may be the graphical look at Fed members' mentions from the US Dollar at recent meetings. The chart broke out before yesterday's meeting. Meanwhile, Mario Draghi thinks"Bravo miei amici , bravo! Lavoro ben fatto.

" Of course, the implications better interest rates favor the banking sector because they disfavor gold. Gold after all may be the 'no one's liability' asset inside a financial world stuffed towards the gills with liabilities, including on Central Bank balance sheets and government coffers. Why on the planet would it increase when everything is in check?So it's very key for investors to determine whether or not the Fed has credibility.

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