Metals Market Update: Yellen’s Dilemma

This article is by Addison Quale, SchiffGold Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.

Metals have again found themselves very much range-bound this past month. Gold is trading between $1170 and $1230, and silver is bouncing back and forth between $15.75 and $17.50. We certainly seem to be in a kind of holding pattern until things shake out further. With geopolitical drama at a bit of a lull and everyone holding their breath until the next FOMC meeting in June, there hasn’t been too much to move the metals prices up or down. Clearly, something has to give.

The June Fed meeting could be a significant event at least. As this past Wednesday’s FOMC minutes suggest, the Fed will not raise rates next month. This dovish news could be the catalyst for metals to break out of their current rut.

As Peter has been reporting for over a year now, the US economy is not nearly as strong as the media would have you think. 2015 economic data has made it even harder for the recovery storyline to stick – especially with Q1 growth now confirmed to be lackluster. With the stock market very much dependent on easy money policies to keep chugging higher, Yellen has found herself caught between the proverbial rock and hard place.

The rock, of course, is the Fed’s claim that it will raise rates when the economy is strong again and abandon years of easy money policies and zero interest rates. The hard place is that, in truth, the economy is starting to veer back towards recession again. As such, it’s going to continue to need whatever easy money policies are in place just to keep inching forward. Additionally, the bull market in stocks (the lipstick on the pig) has depended on ZIRP to keep going higher. So if the Fed really does go ahead and raise rates, you can say goodbye to the recovery and the bull market in stocks (not to mention the solvency of the Fed’s balance sheet, as their bond portfolio would tank).

When it becomes clear the Fed has no choice but to continue ZIRP (and re-up QE), expect metals to take off. This may take place towards the end of this year. Unless, of course, something else hits the geopolitical stage.

In the meantime, prices are still very low. Therefore, now is a great opportunity to buy gold and silver.

Remember, you don’t have to be a gold bug to own metals. Even Jim Cramer understands that they are just insurance against this failing fiat currency system. You’d have to be nuts not to own something of value like a house or car and NOT have insurance. The same goes for investing and not having gold in your portfolio.

One day, in the near future, no one will want to sell their metals for any amount of dollars. Don’t wait until then to make your move.

Relevant Links:

1. First Quarter GDP growth leaves a lot to be desired.

2. Yellen seems to be talking down the market.

3. Based on the latest FOMC minutes, the Fed looks doubtful to raise rates in June.

4. Jim Cramer on why gold is your insurance policy.

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