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The Federal Reserve wrapped up another meeting without making any changes to its current extraordinary, loose, inflationary monetary policy but the central bank did hint that it may start tapering its quantitative easing program “soon” and that was enough for the markets. They continue to expect the Fed will tighten monetary policy and successfully fight surging inflation. Gold sold off after the FOMC statement came out, dropping about $10 but gold will explode and the dollar will implode when the markets figure out the Fed is crying wolf when it comes to monetary tightening…
The gold market has battled these headwinds for months. Every time the Fed hints at tightening, gold sells off. Every time inflation numbers come in hot, gold sells off. This doesn’t make sense. Why would investors sell an inflation hedge during an inflationary period? Because they honestly think the central bank can and will sweep in and successfully fight inflation but…gold will explode and the dollar will implode when the markets figure out the Fed is crying wolf when it comes to monetary tightening. As we have said over and over again, the Fed cannot possibly tighten in this economic environment and even if the Fed does begin to taper, it will eventually reverse course and ultimately expand QE.
At some point the markets will tire of this game they are going to be tired of a boy crying wolf over and over and over again, and a wolf never actually showing up. At some point, the markets are going to figure this out, understand the Fed’s predicament, and then it’s going to hit the fan.”…[That being said,] you can’t wait for that to happen to act. You need to be positioned before everyone wakes up — or not even everyone — just a significant percentage of those who are asleep right now to wake up. That’s all it takes. Not everybody. Just a large enough minority to figure it out and that’s all it’s going to take.”
As for the dollar, during the big stock market selloff on Monday, the greenback was up overall, but it was down against the traditional safe-haven currencies, including the Japanese yen and the Swiss franc. It was also down against gold. Nevertheless, a lot of mainstream commentators claimed the dollar was strong, proving that it remains the go-to safe haven but that isn’t true. The action in the foreign exchange market and in the gold market doesn’t actually prove that the dollar is retaining its safe-haven status. It’s more evidence that it is losing that status as more people are preferring Japanese yen, Swiss francs and gold to the dollar.
Editor’s Note: The original post by Peter Schiff has been edited ([ ]) and abridged (…) above for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.
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