Gold is modestly higher after bouncing from in front of important trendline/moving average support at 1241.30/1235.82 midweek. At this point, the yellow metal is slightly higher on the week. A higher close today would break the string of lower weekly closes in the two previous weeks and confirm a simple hook reversal on the weekly chart.
Dovish comments from St. Louis Fed President James Bullard, show that Minneapolis Fed dissenter Neel Kashkari is not a lone voice in the wilderness calling for a pause in the tightening schedule. Expressing particular concern about waning inflation pressures, Bullard said “The Fed can wait and see how the economy develops before making any further adjustments to the policy rate.”
Bullard is a nonvoter, so he can’t really bolster Kashkari’s dissent. However, his concerns further highlight the fact that the FOMC as a whole is ignoring the data.
In the video we shot yesterday, I suggested that investors are confused by the Fed’s confidence; what do they see that the rest of us are missing? ECB President Mario Draghi may have provided the answer by telling EU leaders that he expects the economy and wages to grow and that “confidence is the cheapest stimulus”.
Zerohedge rightfully pointed out that that sentiment does not explain the ECB’s €4.2 trillion balance sheet. The Fed is clearly doing the same thing, trying to foment confidence despite the realities evident in the data.
At some point though, reality is likely to overcome this fake confidence and not only will confidence in the economy fail, but confidence in the Fed itself will fail. In that respect, confidence becomes a very, very expensive form of stimulus.