Gold and silver were losing value in the morning hours on Tuesday as investors remain fairly calm until the latest Federal Reserve Open Market Committee concludes tomorrow. This particular meeting is being watched by investors more so than a regular meeting because it is believed that the fate of monetary policy in the United States will be decided over the course of the next day and a half or so. We will also take a quick look at European and Asian stock market and economic outlooks as both have been struggling as of late. The US Dollar Index is down a bit on Tuesday, back to the levels of a 4 month low that it was at on a few different occasions last week. Keep your eyes and ears peeled this week as the FOMC meeting taking place could mean for some of the biggest news out of the US all summer.
The Federal Open Market Committee is the body of people who decide what happens as far as monetary policy in the United States is concerned. Their meeting, which got underway Tuesday morning and wraps up Wednesday afternoon, is going to focus on the future of monetary policy in the United States. The policy that is currently being employed by the United States is known as Quantitative Easing and works by pumping millions and millions of dollars into the US economy every month. This large-scale pumping of money into the economy devalues the US Dollar in hopes that it will make our exports more affordable to outside buyers. Up to this point, many believe, the QE policy has done a good job of taking us out of the recession that the world experienced in 2008.
For this reason, there is a strong outfit of people who believe that QE has served its purpose and should be done away with, but there are also a large portion of people who believe that QE should be kept around a bit longer.
Perhaps the most popular thought circulating around now is that QE will be wound down over the course of an extended period of time. The Wall Street Journal reported yesterday that they think the FOMC will decide that QE should be tapered off over the course of the summer or even longer. Tapering off of this monetary policy will help preserve low interest rates while at the same time avoid shocking the market to the point where everything is thrown into an upheaval.
No matter what your thought is, we will have to wait until Wednesday afternoon until we will really find out what the future of monetary policy in the US will hold. Fed Chairman Ben Bernanke is set to have a press conference immediately following this meeting, which is what everyone is really waiting to hear about.
Rest of the Week Roundup
As we move forward into the rest of the week the main story catching everyone’s attention is the FOMC meeting, but there are still other things to look out for.
The euro currency is doing a bit better in the early running of this week after some better than expected German consumer confidence reports. The report in question also indicated that German economic activity might be unexpectedly positive for the rest of 2013, but that is yet to be seen.
It seems as though all news we have heard coming out of Asia has been negative lately, and the early part of this week is no different. The Japanese Nikkei Index is down yet again, though today’s losses are nowhere near as bad as some of the declines we have seen over the course of the past few weeks. The reason we continue to talk about the Nikkei Index is because many investors from across the world are convinced that the Nikkei Index will dictate a lot of the activity we see in other world stock markets, including the US’.