Chairman Powell speaks to Senate Banking Committee

In a testimony prepared for the Senate Banking Committee, Chairman Jerome Powell conceded that recent data suggested a mixed message as to the current state of the economy in the United States. While some indicators suggested a stabilization in activity, other studies pointed to “a modest rebound”.

In his testimony Chairman Powell mentioned that it will not be until the current coronavirus pandemic is contained that we will see a full recovery of the economy. He went on in his testimony, “That said, the levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery.”

According to the recent statement released immediately following last week’s FOMC meeting, the press conference that was held by Chairman Powell, and today’s testimony to the Senate Banking Committee, the Federal Reserve will continue to purchase of treasuries along with mortgage-backed securities in attempts to prop up the economy in the United States.

This most current round of quantitative easing has added $3 trillion to the Fed’s balance sheet since the beginning of March. Add to this the 11 lending programs that were set up by the Federal Reserve which have been earmarked to continue to keep credit and liquidity moving through the financial markets including corporate bonds.

In an article penned by Greg Robb and Jeffry Bartash four MarketWatch they said that,
“The Federal Reserve on Wednesday maintained a firmly dovish stance despite some tentative signs that the economy is bottoming. The Fed said it doesn’t expect to lift its benchmark interest rate until 2023. Only two of 17 top officials said rates would move slightly higher in 2022.”

Krishna Guha of Evercore ISI said, “The June FOMC meeting has delivered a firmly dovish outcome across both QE and rates in what we view as a concerted effort to prevent any acceleration higher in yields and signal maximum support for the recovery.”

Most analysts are on the same page and view recent Fed action is extremely dovish, and most analysts also believe that this dovish demeanor is here to stay at least for a couple of years. The repercussions in terms of gold pricing based upon current and future Fed actions can only be viewed as bullish for the precious metal.

Wishing you as always good trading and good health,