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Gold Lifted as Bernanke Clarifies Fed Positionby Peter A. Grant
Jan 15, AM 
Gold has jumped to a new two-week high, shifting attention back to the high from three weeks ago at 1694.86. Keep in mind that the midpoint of the $400 range that has dominated for more than a year comes into play at 1721.61.The yellow metal has been lifted by the recent unraveling of the notion that the FOMC suddenly turned more hawkish at their December meeting. You may recall that gold dropped rather precipitously two weeks ago with the release of minutes from that meeting, where "several members" favored a halt or cut to Fed accommodations as soon as this year. This was perceived as being a rather dramatic shift in sentiment, and yet apparently those members voted in favor of the shift in guidance that calls for a continuation of über-accommodative policy until the jobless rate falls to 6.5%. The lone dissenter remained Richmond's Jeffrey Lacker. Yesterday, Fed chief Ben Bernanke made it quite clear that the Fed will keep its foot on the monetary gas pedal for some time to come. “There are some positives, but I want to be clear that while we’ve made some progress there is still quite a ways to go,” said the chairman. He reminded his audience of his belief that the overreaching lesson of the Great Depression is not to choke-off growth by letting monetary policy get too tight. This sentiment remains a feature of Fed policy statements, in the language that pledges the "highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens." I doubt that the Fed will backtrack on the guidance targeting the unemployment rate at 6.5%. In fact, Minneapolis Fed's Kocherlakota is already advocating for a more aggressive 5.5% target rate. There have been a number of other dovish comments in recent days, that serve to counterbalance the December FOMC minutes. Some from members with dovish leanings, but some also from more centrist members. With the Fed's position at least somewhat clarified, focus now shifts to the looming debt ceiling debate. President Obama vowed yesterday not to negotiate on the matter, while warning of the possibility of economic calamity and "haywire" markets. He bemoaned the “absolutist position" taken by some members of Congress back in the summer of 2011, while seemingly taking one of his own. Fitch warned of a possible downgrade to the U.S. sovereign debt rating. David Riley of Fitch said, "We thought the 2011 crisis was a one-off event …. if we have a repeat we will place the U.S. rating under review." With both sides seemingly digging in their heels, this fight may actually end up being worse than the one seen in 2011, which culminated with gold achieving its all-time high of 1920.74. NEWSLETTER SIGN-UP Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. USAGOLD, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.
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Tuesday January 15
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