Closing Gold & Silver Market Report – 1/20/2012

NEXT WEEK’S FED MEETING BRINGS TIMELINE ISSUES

The Federal Reserve’s new communication strategy is all about creating more transparency. But as Wednesday’s meeting approaches, financial markets are preparing to be confused. The biggest part of the confusion is over the timing of the Fed’s announcements. At 12:30 p.m. (EST) Wednesday, the Fed is to release its typical statement about the policy meeting. At 2 p.m. (EST) Wednesday, it is to release its interest rate forecasts and inflation projections. Then at 2:15 p.m. (EST) Wednesday, Fed Chairman Ben Bernanke will hold a news conference. Here are the four concerns of many Fed watchers:

1. If the Fed is not publishing its interest rate forecast until 2 p.m., then how will it word the 12:30 p.m. policy statement? The markets closely watch these statements, and there will be a great deal of time between the two announcements.
2. If nothing is mentioned in the 12:30 p.m. policy statement, does that telegraph a hawkish move in monetary policy?
3. There are one and a half hours of uncertainty between the policy statement and the 2 p.m. forecasts, and markets hate uncertainty.
4. Will the interest rate forecast match what the Fed believes to be the best policy? In other words, will the projections be moderated to match the direction the Fed wants to go? Are they projections, or are they preferences?

The Federal Reserve meeting should be the No. 1 topic as markets open Monday. Please enjoy your weekend!

At 4 p.m. (EST), the APMEX precious metals spot prices were:

• Gold - $1,668.50 – up $12.50.
• Silver - $32.26 – up $1.67.
• Platinum - $1,539.10 – up $20.10.
• Palladium - $680.00 – up $0.60.