In a nutshell, Janet Yellen and the other members of the Fed’s Board of Governors have no idea what to do. This leads to significantly-less incentive to “buy the dip, ‘ as the Federal Reserve is looking to tighten policy by moving interest rates higher”.
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But Robin Bhar of Societe Generale noted the market needs to see more investors taking long positions for prices to break above highs of $1,150 to $1,170.
“European stocks jumped at the start of the week, encouraged by a positive reaction in United States markets to the weak USA employment report that spawned the biggest daily reversal for the Dow Jones Industrial Average in four years”, said analyst Jasper Lawler at CMC Markets.
He adds that investor complacency over inflation is “misplaced” and says the inflation-proofing attribute of gold could prove very useful to a portfolio in the future. He pegs at 5 percent the naturally occurring unemployment rate, which accounts for things such as people moving between jobs and is thought to be a level that does not fuel inflation.
That could potentially point to a change in the Fed’s policy of record-low interest rates that have been in place since the recession.
The only result of these years of monetary expansion and interest rate manipulation is economic instability and distortion. The first is that proponents of an interest rate increase generally treat it as an end in itself. This is a frightening reason, implying as it does that the Fed is now held hostage by the financial markets.
Drugmaker Valeant Pharmaceuticals global tumbled 10.3 percent as it came under renewed fire for its drug-pricing policies with a front-page New York Times article questioning its practices. But “I do not have a Bloomberg screen on my desk”.
The ICE U.S. Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, rose 0.5% to 96.4670. Sometimes it is added that these artificially low rates have inflated asset bubbles.
On the other hand, a central bank can also be used to “stimulate” employment and production in the service of politicians leading up to an election, to make it seem that those in political power have the magic wand to “create jobs” and better standards of living – what is sometimes referred to as the “political business cycle”. They are also weighing on the nation’s growth.
The financial markets will get another look at the Federal Reserve’s minutes of the Federal Open Market Committee (FOMC) on Thursday. It can not withstand all of this negative economic news.
“Preemptive interest rate policy would have been extraordinarily tight in 2002 then would have gradually abated to around the level eventually reached in June 2006”, the economists wrote. It is the balancing of resource uses and goods production across time.
Confirmations of the same are now coming from the upper echelons of the investment world. “QE3 wasn’t bullish. Gold went down with QE3, so why should QE4 be any different?”
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Global markets have been choppy since fears grew over a slowdown in the Chinese economy and its impact on global growth.
