Investors have cooled off a bit on gold and other precious metals this evening. Following an announcement by the Fed, there is hope of seeing the US Dollar recover. That is idle hope first and foremost, as this currency is going through its weakest period since 2018.
The Fed Offers no Real Solutions
A lot of people had high hopes for the Fed “minutes” today. Given the current financial situation, it is evident that something needs to change. What that change will entail exactly, is difficult to determine. The US Dollar is simply underperforming against all other major currencies. Turning that ship around is nearly impossible for the central bank.
That being said, the Fed is hopeful about its yield curve control program, should it become necessary. Capping bond yields is a very difficult decision, and one the central bank doesn’t support fully. However, it is evident that some temporary relief can be provided by exploring this option more actively. Treasuries holders won’t be too amused by these decisions, but that is the price to pay.
Furthermore, the Fed is looking at introducing more solutions. Assuming financial conditions worsen – which they inevitably will – there will be a cap on yields moving forward. No other details were announced, other than “using the full set of tools to support the US economy‘. Not the most hopeful message by any means, but it is a realistic outlook.
All in all, there is no real course of action by the Fed right now. This doesn’t mean the US economy is stable by any means, as the Dollar is still very wobbly. Moreover, the full impact of the first batch of stimulus checks has yet to become apparent. There is, currently, no long-term hope for the US.
Gold Price Remains Subdued
It is interesting how most investors are seemingly satisfied with the Fed right now. No course of action means there is no recovery or positive outlook. For some reason, most people don’t see it that way, even though everyone must acknowledge things are still very dire.
Continuing to diversify portfolios is the only viable course of action. Gold, silver, and Bitcoin will shine throughout the second half of 2020, regardless of what the Fed might try to do. This year will not end on a high note for traditional finance. Those not taking the necessary steps will feel the real impact very soon.
Despite all of this, the gold price took another big hit. It is currently trading at just under $1.930 per ounce.