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Federal Reserve Leaves Rates Untouched

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Federal Reserve Leaves Rates Untouched

The Federal Reserve has yet again failed to change interest rates.

Interest rates have remained frozen since last December.

Rates remain the same

Janet Yellen, Chair of the Federal Reserve, announced on June 15th that yet again interest rates would remain the same, despite slow signs of growth in some regions of the economy.

Interest rates rose for the first time since the financial crisis in December 2015, and the Federal Reserve have not raised the interest rate since.

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Why do rates remain frozen?

The Federal Reserve is currently reluctant to increase interest rates for some reasons, these include:

  • The rate of employment has slowed down
  • Fixed investments in business have been cautious
  • Market measures of inflation have fallen
  • The upcoming UK referendum regarding the EU
  • The German 10-year bund remains small

The key focuses for keep interest rates unchanged, however, have been the decline in the job market and the EU referendum in the UK (Brexit).

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Slow Jobs Market

The slowdown in the jobs market has concerned the Federal Reserve.

Work vacancy production plummeted in May 2016, the Federal Reserve are planning to review the figures in July to see if there are signs of improvement in the jobs market this month.

The vacancy production in the US fell to the lowest levels in six years in May 2016.

While the figures for job production are disappointing, Loretta Mester, Federal Reserve President in Cleveland, has reportedly stated that we should not focus on one number too much.

She believes there are many factors to take into consideration such as seasonal demands.

Job production has been falling since February when the rate of job production was 233k.

The rate fell to 186k in March and 123k in April.

The last recorded figure was in May when job production dropped to 38k.

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Brexit

Yellen has said that the upcoming Brexit has influenced the Federal Reserve’s decision to keep interest rates unchanged.

Opinion polls for the upcoming referendum show that results are still close.

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Yellen has warned of the possible financial consequences that the results of the referendum could have on global markets.

The Bank of England has recently stated that the UK leaving the EU would cause a global financial crisis.

Signs of growth in the markets

Although it may not appear so, there is evidence of growth in the US economy.

The Federal Reserve predicts that unemployment will remain below 5% for the next three years.

Earlier this month there were reports that the manufacturing industry experienced an unexpected boost.

Manufacturing companies have welcomed the news, but they have remained cautious.

They have called the increase a move in the right direction.

The journey to economic recovery

There have been signs of a US recovery for years.

With this in mind, lack of change in interest rates have surprised and frustrated many.

The US economy started to show signs of growth back in the second half of 2009.

Current production of services and goods have risen 10% higher than its pre-recession figures, and is 15% higher than the lowest point during the recession.

The slowdown in growth, however, predates back before the recession.

The decline of growth is due to some different factors:

The US economy has had a slow journey to recovery, and there is still a long way to go.

The Federal Reserve’s interest rate policy has played its part.

Only so much will protect the US from the potential global economic breakdown.

Summing it up

The current state of the US interest rates has frustrated many people;  Janet Yellen and the Federal Reserve have been determined to keep interest rates at a steady level for six years.

There has only been one increase in six years, and the next growth is uncertain.

There are many reasons for the Federal Reserve’s reluctance to increase interest rates, mainly the current lack of job production and the upcoming UK referendum.

The fall of job production in May has had many people alarmed.

However, Loretta Mester has stressed that we cannot focus on one figure.

The upcoming UK referendum has the potential to cause an economic catastrophe.

The UK public remains evenly divided with opinion polls showing an almost 50-50 split.

The US has come a long way in its journey to recovery, but there is still a long way to go.

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Gold Becoming ‘Unavailable’ Due to Overwhelming Demand

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Gold Becoming ‘Unavailable’ Due to Overwhelming Demand

If you can find gold coins or gold bars available for purchase, it might be a good idea to get your hands on them.

Major gold dealers are reporting that gold bars and coins are virtually unavailable right now as investors flood into the precious metal as a safe haven.

Yesterday, Kitco announced that it is almost completely sold out of the most common one-ounce gold coins. American Eagles and Buffaloes from the U.S. Mint are out of stock. The same goes for Canadian “Maple Leaf” coins, Great Britain’s “Britannias,” Australia’s “Kangaroos” and South African Krugerrands.

Josh Strauss, a partner at Pekin Hardy Strauss in Chicago says “There’s no gold. There’s roughly a 10% premium to purchase physical gold for delivery. Usually it’s like 2%. I can buy a one ounce American Eagle for $1,800… $1,800!”

The U.S. Mint does have American Eagles for sale, but they are listed at $2,175 for a one ounce coin, a massive 33% premium over yesterday’s spot price of $1,630 per ounce.

Ludwig Karl, a board member of Swiss Gold Safe Ltd., said “It’s absolutely crazy what’s going on. Right now, if somebody wants to buy gold, I wish them all the best in finding it. Most of the bullion dealers are closed.”

Debra Thomson, sales director at IBV International Vaults, added “The last time I saw this amount of chaos in the market was with 9/11.” IBV offers safe-deposit boxes and the purchase of precious metals worldwide.

And Seamus Fahy, co-founder of Merrion Vaults, says “A buyer would have been fussy about the coins they want two months ago. Now they will buy anything they can get their hands on. They are desperate to get physical gold.”

If Goldman Sachs strategist Jeffrey Currie is right, gold coins will continue to be scarce as demand skyrockets over the coming months with every newly-announced government stimulus plan.

During this month’s massive selloff, gold initially dropped as well. It did the same thing at the beginning of the 2008 financial crisis, dropping around 20%. But in November 2008 when the government announced the first of many quantitative easing plans, gold stabilized and climbed higher.

Currie believes that with the announcement last week that the Federal Reserve would start buying $700 billion worth of Treasurys and mortgage-backed securities, once again we are mirroring what happened in 2008, and that means gold’s massive rally is likely underway.

Not only could the Fed’s quantitative easing measures send gold prices soaring, the supply imbalance will likely get worse, adding more fuel to the fire.

Switzerland’s refining industry, which is a major international hub and has three of the world’s largest refiners, is shut down in an effort to slow the advance of the coronavirus and mines across the globe are seeing production slow or come to a complete halt as governments close anything deemed non-vital in the wake of the outbreak.

“There’s no gold” is likely to become a common refrain in the coming months.

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Gold Climbs Again As Fed Turns On “Unlimited” Printing Press

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Gold Climbs Again As Fed Turns On “Unlimited” Printing Press

Gold just had its single largest one-day gain going back to at least 1984, climbing $31.10 an ounce to close at $1582.30, all thanks to the Federal Reserve cranking up the printing press for the latest round of quantitative easing (QE).

Yesterday, the Fed announced that it would start buying mortgage-backed securities and Treasurys in an unlimited amount in an attempt to add liquidity to the financial markets.

What makes this round of QE unique is that the Fed hasn’t put a monetary limit on how much it is willing to spend to keep the markets afloat.

With an ‘unlimited’ amount of money being printed, it shouldn’t come as a surprise that investors have flocked to gold recently as a store of value during these turbulent times.

“The endless QE to trillions in global liquidity programs are all in gold’s favor among the general turmoil,” Peter Spina, president and chief executive officer at GoldSeek.com told MarketWatch. “Gold is returning back to its function as a global currency.”

Spina also said he wouldn’t be surprised to see gold climb to $1,700 an ounce by “Friday of this week or next,” and that prices could climb to $2,000/ounce and higher in the second quarter.

Yesterday Goldman Sachs said in a note that gold bullion is “probably at an inflection point and it is a time to buy” due to the concerns over the dollar being debased with all the money being printed.

“Accordingly, we are likely at an inflection point where ‘fear’-driven purchases will begin to dominate liquidity-driven selling pressure, as it did in November 2008” the note added.

An interesting twist to the increased demand for gold right now is the very real possibility of a shortage in the near future, which could absolutely cause prices to scream higher.

The coronavirus is taxing supply chains, and could make it very difficult to get new gold supply to the market.

Spina from GoldSeek.com added “So with a true gold rush underway, there is a perfect storm brewing for the gold and gold miners.”

Three of the largest gold refineries (Valcambi, Argor-Heraeus and PAMP) announced yesterday that they will be closing down their production facilities in Switzerland for at least a week as part of an effort to control the spread of the coronavirus.

The three produce nearly one-third of the annual global supply of gold.

GoldCore, a bullion provider based in Dublin, said Monday that it has “experienced record demand in recent days and the global supply of gold and silver bullion coins and gold bars has quickly evaporated.”

“Most of the largest gold refineries and mints in the world have closed their refining and minting operations for the next two weeks, and this suspension in production may become longer which …will badly impact supply,” GoldCore said.

Mark Mobius, a veteran investor told Bloomberg TV in an interview “(Gold’s) recent sell-off alongside risk assets such as stocks and oil was a sign of pure panic, with investors selling everything as the pandemic spread.”

“I think it’s a mistake,” he added. “People should have gold and this may be a good time to increase holdings in gold — in fact I’m thinking that myself.”

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Dow Plummets Despite Rate Cut

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Dow Plummets Despite Rate Cut

Stocks fell in volatile trading on Tuesday after the Federal Reserve slashed interest rates by half a percentage point in an emergency effort to stem slower economic growth from the coronavirus outbreak.

The Dow Jones Industrials stumbled 352.4 points, or 1.3% to break for noon at 26,350.92. The 30-stock average gyrated between sharp gains and solid losses after the decision was announced.

The broader S&P 500 dropped 37.03 points, or 1.2%, to 3,053.20.

The tech-heavy NASDAQ let go of 98.41 points, to 8,853.75.

Bank shares fell broadly, led by a 3% drop in Bank of America shares. JPMorgan Chase skidded 2.5% and Citigroup slid 0.4%.

The decision came two weeks before the Fed’s scheduled meeting as the central bank felt it was necessary to act quickly to combat the effect of the virus spreading worldwide. It’s the first such emergency action coming in between scheduled meetings since the financial crisis.

Investors have been fretting over a potential economic slowdown as the coronavirus spreads around the world. More than 89,000 coronavirus cases have been confirmed globally along with more than 3,000 deaths related to the virus.

Prices for the 10-Year U.S. Treasury gained sharply, dropping yields to 1.03% from Monday’s 1.15%. Treasury prices and yields move in opposite directions.

Oil prices gained 63 cents to $47.38 U.S. a barrel.

Gold prices $43.00 to $1,637.80 U.S. an ounce.

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