From correcting excess to questioning the basic assumptions underpinning the stock market rally

Bloomberg/John Authers/9-23-2020

cartoon image of an elephant balance on a gold coin“Recent speculation is that the Fed may not print money and cut rates with quite the gay abandon that had been assumed. This may or may not be good news for the U.S. economy, but it raises real yields and for investors in gold and in risk assets, who might benefit from currency debasement, it is definitely bad news.”

USAGOLD note:  It also may or may not be true. Given the Fed’s well-established penchant for securing the stock and bond markets and gearing monetary policy to that end, it is difficult to believe that, when push comes to shove, it is going to act any differently in the future than it has in the past. More than anything, the Fed does not want to send the wrong signal and upset the precarious balance it has already achieved. From that perspective, one could go so far as to say that a falling gold price might signal precisely the sorts of things the Fed is trying to avoid.

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