The minutes from the FOMC meeting held in December were released on Tuesday, Jan. 4th. This was the first full day of the metals correction.
There was no information in the minutes that would justify a plummet in prices for metals. As mentioned before, profit taking and reallocation of investment funds is the primary cause for the current correction. Jobs numbers and dollar performance are also a factor as well.
Gold is attractive at the moment because of the low interest rates being charged by the Fed., if rates were higher, capital would perform better in an interest bearing investment rather than precious metals. Information coming out of the minutes emphasizes rates remaining at current levels for some time. This is good news for precious metals investors, as cheap money from the fed equals to no returns on cash accounts, leaving gold and the rest of the precious metals a better alternative
An excerpt out of the Committee Policy Action section of the FOMC December meeting minutes.
” The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period “
The minutes also state that the revovery is not coming fast enough to offset anything we have been doing to jumpstart it.
Thomas Hoenig is the only one in disagreement, saying that it is not in the best interest of the American economy to continue cheap money, and the economy is on a rebound strong enough to sustain itself.
Read the minutes here;