In what is likely the clearest signal one could ever get in a market the Federal Reserve today announced today that they have broken with tradition and have set a target for the inflation rate to guide monetary policy. This breaks with their supposed (and mutually-exclusive) mandate of full employment. This prompted Pimco’s Bill Gross to tweet:
Gross: Fed likely on hold for at least next 3 years. QE 2.5 today, QE 3, 4, 5, … lie ahead. Financial repression.
If you don’t know what this means, then I’ll make it easy for you, Gold is going to moon-shot. The ultimate currency shot up $41.50 on the news or a shocking 2.5%, because as readers should know, Gold futures are not allowed to run up more than 2% during one COMEX session. It closed on high volume at $1708.50 per ounce. That is did this in just over an hour of trading and did not give any of those gains back should be seen as a major turning point in the market. Silver piled on 3.4%, or $1.09 to close at $33.17 per ounce.
There is nothing now that will stop this advance in the US Dollar price of Gold. Ben Bernanke has made it clear with this announcement that The Fed stands ready to provide the market with whatever money is necessary to achieve the inflation rate that he wants to see. This will put a bid under stocks as well, especially high dividend stocks and destroy the confidence in the U.S. Treasury market. No matter how much the credit markets want to deflate, The Fed stands ready, like the little Dutch Boy, to just say no.
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