The Federal Reserve has cut interest rates twice this year, slashing rates lower in an attempt to spur the economy and keep the good times rolling.
Despite this fact, the markets are not happy and they have demanded more and as it now appears, they are going to get exactly what they wished for.
The odds of an additional rate cut occurring within 2019 has surged higher, with market analyst predicting overwhelmingly that another rate cut is on the way and soon.
The reasoning for this is the Federal Reserve themselves, as they have proven that they will not and are not going to let the free market regulate itself, as seen in their recent intervention in the short-term lending markets throughout the month of September, in which they rushed in to save the day.
The Financial Times reports;
Despite these bail-outs, the short-term lending markets are still seen as on shaky ground and incredibly vulnerable to a repeat collapse.
This has prompted the Federal Reserve to take even further action, announcing that they would once again resume purchases of Treasury Securities from the open market, in an attempt to keep the system chugging alone.
At the National Association for Business Economics conference in Denver on Tuesday, Federal Reserve Chairman Powell explained how the Fed plans on supporting the markets moving further, however, he strongly stressed that this should not be viewed as Quantitative Easing, stating the following;
Reiterating this point, Powell would later go on to state;
“In no sense, is this QE,”
Obviously to anyone with half a brain, the above statement by Powell is pure nonsense, as this is obviously QE, whether the Fed wants it to be or not.
Obviously to anyone with half a brain, the above statement by Powell is pure nonsense, as this is obviously QE, whether the Fed wants it to be or not.
This recent softening by the Federal Reserve, in addition to the ongoing geopolitical risks that seem to be plaguing much of the world, has resulted in a massive surge into Gold ETF's as market participants seek the protection that only the king of metals can provide.
ETF gold holdings reached an all time high in the month of September, resulting in the longest run higher in holdings, in the past decade. With the most notable being holdings within the UK.
The last time that such demand for gold ETF's was seen was shortly after the 2008 financial crisis, which does not bold well for what may be coming just over the horizon.
According to the World Gold Council, gold backed ETFs added 75.2 tons of metal to their holdings last month, bringing the total to 2,808 tons.
This surpasses the previous record set in 2012, when gold was at $1,700 per ounce, highlighting just how underpriced gold is at the moment.
Despite these warning signs, signals from the Fed and the deteriorating geopolitical climate around the world, gold stubbornly remains around the $1500 USD per ounce level, struggling to break higher.
2020 is going to be one for the record books and I believe that anything could happen as we head into the US Presidential Elections, with political violence and uncertainty creating a powder keg style situation.
These artificially suppressed prices are not going to last much longer, as the fundamentals for higher gold prices are inevitably going to win the day and precious metals are going to surge higher as we head into an even more tumultuous and unpredictable next year.
Until then, enjoy these prices while you can and as always, keep stacking.
- As first seen on the Sprott Money Blog
