Fed Statement 06-20-12

As published by the Federal Reserve


Release Date: June 20, 2012

For immediate release
Information received since the Federal Open Market Committee met in April suggests that the economy has been expanding moderately this year. However, growth in employment has slowed in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending appears to be rising at a somewhat slower pace than earlier in the year. Despite some signs of improvement, the housing sector remains depressed. Inflation has declined, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee anticipates that inflation over the medium term will run at or below the rate that it judges most consistent with its dual mandate.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities. Specifically, the Committee intends to purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less. This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The Committee is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed continuation of the maturity extension program.

Our Commentary - How the News is Affecting Stocks:

The SPDR S&P 500 (NYSE: SPY) moved immediately lower once the news was announced, but it and the index of the same name pushed into the green shortly afterwards. The SPDR Dow Jones Industrial Average (NYSE: DIA) was similarly lower before rising, and the same result was seen in the PowerShares QQQ (Nasdaq: QQQ). Financials would be expected to be most sensitive to Federal Reserve actions, and the Financial Select Sector SPDR (NYSE: XLF) was tracking the broader indexes. Bank of America (NYSE: BAC) and Citigroup (NYSE: C) were moving in the same manner, but each remained in the green on the day after the report. Important American firms General Electric (NYSE: GE), Exxon Mobil (NYSE: XOM) and retailers including Amazon.com (Nasdaq: AMZN), which we've recently written about, were all doing a bit better than the broader indexes.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Buy Gold on the Fed Fiddling

Stocks are down and gold is lower on the latest Federal Reserve FOMC Meeting Minutes. The skinny is that the Fed sounded less dovish, and might be less accommodative in the future. It’s counter intuitive, because the Fed would only be less giving if the economy were solidifying. Nevertheless, stocks are lower because there could be less support from the Fed, and the market is not sure the notoriously faulty forecasters are on target. Gold is dropping, because of two reasons. If the Fed is less free with dollars, then the currency should strengthen; and if the economy is improving, than riskier assets should do better. Here’s why I suggest ignoring the Fed fiddling, and buying gold on the dip.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative tickers include: NYSE: GG, NYSE: AEM, AMEX: ANV, NYSE: AU, NYSE: AUQ, AMEX: AZK, NYSE: ABX, AMEX: BRD, Nasdaq: CTHR, AMEX: CGR, OTC: CGCO.PK, NYSE: BVN, Nasdaq: DROOY, NYSE: EGO, AMEX: EGI, AMEX: XRA, NYSE: GFI, AMEX: GRZ, Nasdaq: GORO, OTC: MYNG.PK, AMEX: GSS, AMEX: GBG, NYSE: HMY, NYSE: IAG, AMEX: THM, NYSE: JAG, AMEX: KGN, AMEX: KBX, Nasdaq: KGJI, NYSE: KGC, AMEX: MDW, AMEX: MGH, AMEX: NSU, OTC: NJMC.PK, NYSE: NEM, OTC: NBRI.OB, AMEX: NXG, AMEX: NG, AMEX: RIC, Nasdaq: RGLD, AMEX: RBY, AMEX: SA, AMEX: XPL, AMEX: TRE, OTC: THMG.OB, NYSE: UXG, AMEX: VGZ, OTC: WITM.PK, NYSE: AUY, NYSE: CDE, NYSE: EXK, NYSE: HL, AMEX: MVG, AMEX: MGN, Nasdaq: SSRI, NYSE: SLW, NYSEArca: GLD, NYSEArca: GDX, NYSEArca: SLV, NYSEArca: AGQ, NYSEArca: ZSL, AMEX: GPL, NYSE: SVM, AMEX: PZG, Nasdaq: PAAS, NYSE: AG.

Buy Gold

The Federal Reserve’s Federal Open Market Committee (FOMC) published its meeting minutes for its March 13 meeting Tuesday afternoon. You can go ahead and read it, but all you need to know is that stocks are lower because of it. The focus of this article, though, is on gold not stocks.

As suggested in the introduction here, if the Federal Reserve parks its dollar-copter, the next step would be to look toward containing inflation. For this reason, the dollar is soaring +0.7% against the euro Wednesday through late afternoon trading hours Eastern Time. The PowerShares DB US Dollar Index Bullish ETF (NYSE: UUP) is up 0.5% deep into the afternoon. Much of the foolhardy popular press is blaming the dollar move on a soft Spanish bond offering… silly short-hands…

For the same reason outlined, gold is on the deep decline. Gold futures are off roughly 3.3%; the SPDR Gold Shares ETF (NYSE: GLD) is off 1.9%; and gold miners Goldcorp (NYSE: GG), Newmont Mining (NYSE: NEM) and Barrick Gold (NYSE: ABX) are off between 5% and 6%. Gold should be on the rise if the global community is once again terrified about a European disintegration via Spanish debt softness and soft data. That would be the give-away for reporters with a clue… Luckily you still have The Greek to fill in the void.

Here’s Why I Would Use this as an Opportunity to Buy Gold:

1. The geopolitical powder keg remains tightly snug between U.S. warships and the Iranian coastline. Nothing has changed with regard to the Iranian nightmare. Iran has not budged in a significant way, and the West’s sanctions are increasingly suffocating it.


2. Recession seems to be overcoming Europe, where 20% of American exports are sold into. Wednesday, a Purchasing Managers Index for Europe was reported below 50, indicating the region is likely in recession. Also, regional retail sales fell 0.1% in volume and 2.1% year-to-year. The regional economy shrank 0.3% in Q4 2011, and seems set to mark another quarter of contraction, which would qualify it for recession. Compounding on this, unemployment for the euro zone reached a record high in February.


3. The European financial crisis has not yet subsided. Wednesday, soft demand for Spanish debt sent the markets into a spin. In a recent interview, Standard & Poor’s Sovereign Ratings Head, Moritz Kraemer said he believes Greece will probably have to restructure its debt again, involving needed aid from its European partners. Obviously, European heads are on record saying the latest bailout would be the last for Greece; now they may be put to the test at a time when their word will be measured. Moritz noted the risk posed by upcoming elections across Europe and Greece.


4. The American economy has been showing signs of strain, with recent manufacturing data, housing reports and consumer information indicating softness.

Thus, all the reasons gold has climbed over the last few years continue to exist, if they are not intensified. So while foolhardy capital may flow out of gold and gold relative investments Wednesday on a few words from the Fed, I suggest investors look to the weakness as an opportunity to add to positions.

Article should interest investors in precious metals stocks: Goldcorp (NYSE: GG), Agnico-Eagle Mines (NYSE: AEM), Allied Nevada Gold (AMEX: ANV), AngloGold Ashanti (NYSE: AU), AuRico Gold (NYSE: AUQ), Aurizon Mines (AMEX: AZK), Barrick Gold (NYSE: ABX), Brigus Gold (AMEX: BRD), Charles & Covard (Nasdaq: CTHR), Claude Resources (AMEX: CGR), Commerce Group (OTC: CGCO.PK), Compania Mina Buenaventura S.A. (NYSE: BVN), DRDGOLD (Nasdaq: DROOY), Eldorado Gold (NYSE: EGO), Entrée Gold (AMEX: EGI), Exeter Resource (AMEX: XRA), Gold Fields (NYSE: GFI), Gold Reserve (AMEX: GRZ), Gold Resource (Nasdaq: GORO), Golden Eagle Int’l (OTC: MYNG.PK), Golden Star Resources (AMEX: GSS), Great Basin Gold (AMEX: GBG), Harmony Gold (NYSE: HMY), IAMGOLD (NYSE: IAG), International Tower Hill Mines (AMEX: THM), Jaguar Mining (NYSE: JAG), Keegan Resources (AMEX: KGN), Kimber Resources (AMEX: KBX), Kingold Jewelry (Nasdaq: KGJI), Kinross Gold (NYSE: KGC), Midway Gold (AMEX: MDW), Minco Gold (AMEX: MGH), Nevsun Resources (AMEX: NSU), New Jersey Mining (OTC: NJMC.PK), Newmont Mining (NYSE: NEM), North Bay Resources (OTC: NBRI.OB), Northgate Minerals (AMEX: NXG), NovaGold Resources (AMEX: NG), Richmont Mines (AMEX: RIC), Royal Gold (Nasdaq: RGLD), Rubicon Minerals (AMEX: RBY), Seabridge Gold (AMEX: SA), Solitario Exploration and Royalty (AMEX: XPL), Tanzanian Royalty Exploration (AMEX: TRE), Thunder Mountain Gold (OTC: THMG.OB), U.S. Gold (NYSE: UXG), Vista Gold (AMEX: VGZ), Wits Basin Precious Metals (OTC: WITM.PK), Yamana Gold (NYSE: AUY), Coeur d’Alene Mines (NYSE: CDE), Endeavour Silver (NYSE: EXK), Hecla Mining (NYSE: HL), Mag Silver (AMEX: MVG), Mines Management (AMEX: MGN), Silver Standard Resources (Nasdaq: SSRI), Silver Wheaton (NYSE: SLW), SPDR Gold Trust (NYSEArca: GLD), Market Vectors Gold Miners ETF (NYSEArca: GDX), iShares Silver Trust (NYSEArca: SLV), ProShares Ultra Silver (NYSEArca: AGQ), ProShares Ultra Short Silver (NYSEArca: ZSL), Great Panther Silver (AMEX: GPL), Silvercorp Metals (NYSE: SVM), Paramount Gold and Silver (AMEX: PZG), Pan American Silver (Nasdaq: PAAS) and First Majestic Silver (NYSE: AG).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.