Gold trading was quiet around the world ahead of the Fed meeting on Wednesday with gold traders taking a wait and see approach after getting burned the last two times.
Gold started out slightly lower, down $0.68 in early trading to $1,570.60. Silver bucked the trend to move up $0.04 to 26.97, bringing the silver/gold ratio to 58.2.
It does not appear that the Fed has much effect beyond short-term price fluctuations, although that could change if the Fed announces a new stimulus program. Looking at the big picture, the Fed has already created something on the order of $6 trillion in new currency. It’s hard to see how making that number bigger with additional stimulus will have much impact on gold prices
I realize this may sound terribly old fashioned, but I believe one of the reasons the Fed finds it so easy to create new money is that they don’t have to actually print it. I’m not suggesting that when the Fed loans money to banks that we should take on the logistics of 18-wheel trucks loaded with pallets of money; that’s just not practical. It just seems like the ease of creating money with the click of a computer mouse leads to the excesses we experience today.
It will be interesting to see how the trend toward digital cash will change our perception of money. Already there are many people going as long as a week without paying for anything with cash. New smartphone apps and add-on gadgets allow even formerly cash-only businesses to accept plastic.
In Sweden, ahead of the curve on the conversion to digital cash, there are already places where it’s now impossible to pay for a bus ticket with coins or cash; the only way to get a bus pass is by cell phone text message. That trend is spreading, it’s already making inroads in our culture.
We’re conditioned to think of money as nothing more than numbers in a computer. What will it mean when we take the final step and do away with the paper all together? I don’t think much will change. We’ll still need more blips than our smartphone will tell us are in our account; companies will still tack on a couple more blips on your bill whenever they can get away with it.
We’ve seen our currency change from precious metals, to paper, to basically nothing. The more nebulous my cash becomes, the more determined I get to keep part of my wealth in hard assets like gold and silver. Like I said, maybe I’m old fashioned that way.
Hussman's Open Letter to the Fed; The Problem with Bubbles; Textbook Pre-Crash Bubble; Reflections on Not Chasing Bubbles; Integrity vs. Respect | Mike Shedlock