Hypocritical Fed Chair Finally Admits Public Should Buy Gold
November 3, 2014 -- The Japanese central bank doubled down on stimulus just as our own Federal Reserve officially ended QE here at home. The U.S. Dollar surged on the news and precious metals spot prices took a beating.
Gold and silver longs must once again contend with some ugly charts. Gold violated important support at $1,180/oz, and silver briefly fell below $16/oz before recovering some losses late on Friday. And silver did the same thing all over again this morning.
From a technical standpoint, even lower prices may be on the way unless support levels can be regained in the coming days. Any rally would likely be driven by weakness in the dollar or in the equity markets, where the metals continue to trade inversely. This week, there isn’t much in the way of scheduled events with the potential to halt momentum in the dollar or in stocks, though investors will be watching Friday’s key Employment Situation report closely.
“Maestro” Alan Greenspan Criticizes the Fed:
Too Little and Too Late!
Alan Greenspan is desperately attempting to rehabilitate his tattered image by encouraging responsible monetary policies that he personally rebuked when it actually mattered.
Greenspan epitomized modern central banking during his time. In fact, one could say he created it. During his tenure at the Fed (August 1987 - January 2006), he never encountered an economic problem that couldn’t be solved with bailouts and lower interest rates. Investors, pundits, and other bankers adored him for his role in fostering the dot com boom and subsequent real estate boom. He somehow avoided blame for the resulting busts -- earning the moniker “Maestro” and even honorary knighthood from the British Crown along the way.
Greenspan’s loose money policies shocked those who followed his early career. His perpetual tinkering with interest rates represented a complete 180 degree turn for a man who previously advocated honest money backed by gold and admired Ayn Rand and her free-market ideals.
Last week, Greenspan shocked everyone who followed his career at the Fed. He spoke at the New Orleans Investment Conference and made comments implying another remarkable about face. Greenspan characterized the Fed’s balance sheet as a “pile of tinder” and said “inflation will eventually have to rise.” And he seemed to lament that a “gold standard is not possible in a welfare state.” When asked for his opinion on gold prices, he responded by saying he expects them to go “measurably” higher.
When was the last time a central banker talked like that? Never. Oh wait, Alan Greenspan before he joined the Fed. Unfortunately he spent his tenure at the Fed gradually undermining honest money and paving the way for his successor Ben Bernanke, and his peers worldwide, to intervene even more aggressively in markets.
Last week, Japanese central bankers, who almost certainly studied and admired Greenspan’s works as an interventionist Fed chair, moved to significantly devalue the Yen. The U.S. Dollar rallied, gold prices fell and his comments in New Orleans went largely ignored. The turn of events is more than a little ironic.
We’re glad Greenspan appears to be coming back into the honest money fold. But we can’t help but wish he had stuck to these principles when it mattered. Whatever he says now is way too little and way too late to avert the coming reckoning. But those who are paying attention still have time to prepare for it.