Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

FOMC Statement Sends (The Perception of) Silver Sharply Lower as QE3 Hopes Fade Further

Commodities / Gold and Silver 2012 Mar 23, 2012 - 01:30 AM GMT

By: Dr_Jeff_Lewis


Best Financial Markets Analysis ArticleThe Federal Reserve’s Federal Open Market Committee or FOMC released a somewhat more optimistic rate statement on Tuesday, March 13th.

The FOMC made no mention of further quantitative easing measures in its latest statement, thereby further reducing (managing) expectations of additional quantitative easing measures, and ‘prompting’ a notable selloff in silver.

With respect to inflation, the FOMC observed that, “Inflation has been subdued in recent months, although prices of crude oil and gasoline have increased lately. Longer-term inflation expectations have remained stable.”

FOMC Keeps Rates at Historic Lows but Lacker Dissents

The central bank’s monetary policymakers decided to keep its benchmark Fed Funds Rate between zero and 0.25% yet again, as had been anticipated by the consensus of market analysts. 

In addition, the FOMC noted that it “currently anticipates that economic conditions —including low rates of resource utilization and a subdued outlook for inflation over the medium run — are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”

Interestingly, FOMC member and president of the Richmond Fed Jeffrey M. Lacker cast a lone dissenting vote against the latter part of that statement, since he “does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014.”

Markets React to the FOMC Statement

The mainstream view is that silver and gold prices reacted by falling swiftly due to the lack of any mention of further quantitative easing measures in the FOMC’s release. This, despite the clearly not-for-profit dumping of contracts as the chairman spoke.

Bond prices also declined in even more dramatic fashion, as yields were pushed sharply higher in anticipation of rising interest rates over the medium term. This was surely an unintended consequence of managing perceptions.

Stocks also gained on the more positive U.S. economic picture painted by the FOMC’s statement, which noted that, “the economy has been expanding moderately” in the month since its last rate statement.  Of course, this is the key sentiment target, and the last real hope for economic growth.

Favorable Fed Bank Stress Test Results Calm Rattled Investor Nerves

Another favorable factor for bank stocks was the release of the Fed’s latest bank stress test analysis, which showed that most large U.S. banks were adequately capitalized to withstand severe financial conditions.

This perfectly timed report soothed markets and investors still recovering confidence in the U.S. banking system after the sub-prime mortgage crisis led to the massive Lehman Brothers bankruptcy in September of 2008. The underlying assumptions regarding ‘severe financial conditions’, along with the definition of how adequate capitalization is calculated are rarely questioned.

Nevertheless, greater confidence in U.S. banks, along with induced selling of precious metals like silver and gold, signal to the mainstream that saving or hedging against further troubles with the financial system are unnecessary.

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of and

    Copyright © 2012 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in