Relatively Soon

In a statement released by the Federal Reserve today, members said they would, as expected, leave the current Federal Funds rate unchanged. “The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further.”

The statement also spoke about their current timeline to begin the process of ‘normalization’ as they begin the process of asset liquidation. This process will occur over multiple years and involve a selloff of their tremendous $4.5 trillion asset sheet. Although their answer to this question was complex, two words emerged from the statement, “relatively soon.”

“For the time being, the Committee is maintaining its existing policy of reinvesting principal payments from its holdings, … The Committee expects to begin implementing its balance sheet normalization program relatively soon, provided that the economy evolves broadly as anticipated.”

It’s the kind of answer one would expect to hear from a teenage son or daughter. When my sons were teenagers, it was one of their standard answers to almost any question.

When are you coming home?

When will you finish cleaning up your room?

When will you finish your homework?

On almost any question you ask a teenager which requires a timeline in the answer, they replace a solid concrete answer with a one-word statement: soon.

However, this phrasing has also become a desirable stock answer for members of the Federal Reserve when asked time specific questions regarding the timetable to liquidate their massive $4.5 trillion balance sheet: relatively soon.

The repercussions of today’s statement had the net result of moving the U.S. dollar lower and moving gold and silver prices higher. Initially both gold and silver had been trading under pressure. However, once the statement was released and the dollar began to sell off, both gold and silver prices were reignited, and the current precious metals rally continued.

Gold futures today settled up $8.30, with the most active August contract settling at $1260.50, a net change of 0.67%.

Wishing you as always, good trading,