Bernanke offers no new stimulus

The chairman of the U.S. Federal Reserve, Ben Bernanke, offered no new stimulus for the American economy Friday, disappointing analysts and economists who had been hoping for measures to counter a slowing in growth.

In a speech during the bank's annual meeting in the resort of Jackson Hole, Wyoming, Bernanke did hint that Congress may need to act to stimulate hiring and growth.

The Fed chairman agreed that deficit reduction is necessary in the long-term, but added that future economic health could be undermined if hiring and growth are not strengthened now.

"Fiscal policymakers should not ... disregard the fragility of the current economic recovery," he said.

Bernanke also was critical of Congress' handling of this summer's battle over raising the debt ceiling. He said it disrupted the economy, and another episode like that could have long-term negative consequences.

To promote growth, Bernanke said the government must pursue tax, trade, and regulatory policies that encourage economic health.

Congress, however, has been focused on reducing the national budget deficits and less occupied with new spending to try to energize the economy. A plan lawmakers passed this month means annual deficits are expected to be reduced by $3.3 trillion US over the next decade through spending cuts.

Analysts noted the lack of new proposals in Bernanke's speech.

"He essentially hit the ball over to fiscal authorities and said, `There's only so much we can do,'" said Aneta Markowska, senior U.S. economist at Société Générale.

Bernanke left open the possibility of future action by the Fed, saying it "is prepared to employ its tools as appropriate to promote a stronger economic recovery."

He announced its monetary policy committee will expand its meeting in September from one day to two in order to study and discuss options to for additional monetary stimulus.

Markowska said the extension of the Fed's September meeting might suggest something new could be unveiled.

"Maybe that's a subtle signal they might announce something," she said.

The Fed chairman said record low interest rates will promote growth over time but that the weak economy requires further help in the short run.

His speech followed the release of a government report that the economy grew at an annual rate of just one per cent this spring and 0.7 per cent for the first six months of the year.

The report predicted only slightly healthier expansion in the second half.

Bernanke said he's optimistic that the job market and the economy will return to full health in the long run.

Most U.S. stocks fell sharply after the speech but later recovered. Late in the morning, the Dow was up 0.4 per cent, the S&P 500 was higher by 0.7 per cent and the Nasdaq rose 1.6 per cent.

Bernanke's speech comes at a critical moment for the economy. Some economists worry that another recession might be near.

Consumer spending has slowed. Home prices are depressed. Workers' pay is barely rising. Household debt loads remain high.

All that, compounded by Europe's debt crisis, has spooked the stock markets and unnerved consumers. Congress is focused on shrinking deficits and seems unlikely to back any new spending to try to energize the economy.

The Fed already announced on August 9 that it would keep short-term interest rates near zero through mid-2013.

With files from The Associated Press Accessibility Links

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Gold Hits All-Time Highs After Bernanke Comments On Stimulus

Jul. 13 2011 - 2:21 pm | 0 views | 0 recommendations |

(Kitco News) – The Federal Reserve has indicated for the second day in a row that further stimulus measures are possible to help jump-start the U.S. economy, propelling gold to an all-time high.

The Fed has not actually announced any new measures and is still monitoring the economy to see whether they are even necessary. But for now, the gold market is factoring in further debasement of the U.S. dollar, analysts said.

News that the Fed is at least thinking about further stimulus comes at a time when the yellow metal is already underpinned by European debt issues and political deadlock in the U.S. on raising the debt ceiling ahead of an early-August target to avoid a default.

August gold has peaked so far Wednesday at $1,588.70 an ounce on the Comex division of the New York Mercantile Exchange, a record for a most-active contract. As of 1:08 p.m. EDT, it was up $23.10, or 1.5%, to $1,585.40 an ounce. Spot gold was $18.60 higher at $1,585.90 an ounce.

The next obvious target for the market is the next big round number of $1,600 an ounce.

“The way we’ve been trading the last couple of days, we (could be) five minutes away,” said Mike Daly, gold and silver specialist with PFGBEST.

The Fed last month said that it was not embarking upon a third round of purchases of Treasury securities in a move to push down long-term yields, referred to as quantitative easing. The second round of QE ended June 30. However, minutes of the June 21-22 meeting of the FOMC, released Tuesday afternoon, showed that a minority is at least considering further action.

Then in congressional testimony Wednesday morning, Federal Reserve Chairman Ben Bernanke in essence confirmed that policy-makers are considering more easing. He said economic weakness may be more persistent than expected, “implying a need for additional policy support.” He also said the Fed is contemplating several “untested” steps to revive the economy.

Thus, markets went from thinking not long ago there would be no further stimulus to now thinking there very well may be, Daly said.

“It’s called many things, but any form of printing of money is obviously dilutive of the dollar, and that’s obviously good for gold,” said Jeff Clark, precious-metals analyst with Casey Research. “That’s the primary reason why gold is moving.”

Of course, the Fed has not embarked upon further stimulus yet. Time will tell whether it happens.

“But there is an obvious indication they are contemplating it. Let’s put it that way,” Clark said. He later added: “The markets are interpreting that as they likely will. And therefore, gold is up.”

Not only is gold up and the dollar down, but the Dow Jones Industrial Average is around 120 points higher on the prospects for more stimulus measures.

Any further easing also adds to worries about inflation, said Daly and George Gero, vice president with RBC Capital Markets Global Futures. Already, China is trying to contain inflation fueled in part by high commodity prices, Daly added.

Mark Johnson, portfolio co-manager with the USAA Precious Metals and Minerals Fund, pointed out that the FOMC minutes released Tuesday left the door open for the Fed to either loosen or tighten policy down the road. Policy-makers have given themselves considerable flexibility, he suggested.

“I think you have to look beyond the statements at the underlying conditions,” he said. “And the underlying economic conditions would basically argue there is going to be no tightening any time soon.”

This implies continued negative real interest rates, which in turn debases the dollar and creates a favorable environment for gold, he said.

“If you couple that with the continued deterioration of the sovereign-debt issues in Europe, you’ve got another driver for gold, as people continue to question the long-term viability of the euro,” Johnson said.

European finance officials have been providing bailout loans while encouraging troubled nations to undertake austerity measures. Analysts often describe the net effect as “kicking the can down the road,” since countries are in essence borrowing money to meet debt obligations.

“They continue to kick the can down the road, but the can is getting bigger and heavier,” Johnson said. “At some point when they kick it, they are going to break their feet.”

Meanwhile, Daly said, the market is only a month or two from the period when it tends to draw seasonal support from gift-giving holidays. A number of important holidays occur in autumn in India, a significant gold consumer, followed by the Christmas season in Western nations.

The buying is accelerating on technical chart factors, Gero said.

“It looks like we’re just off to the races,” he said. “The Bernanke remarks are playing a role in getting both the technical traders and fundamental traders involved.”

The most recent FOMC developments are bullish for gold in both the short and long term, Clark said. But “that doesn’t mean it’s going to be a straight line up,” he added.

He and Johnson said whenever Washington finally reaches an agreement on the debt ceiling, the metal will probably dip. “Any time you take a risk factor of the table, you would expect gold to soften,” Johnson said. Still, he and Clark said this is likely to be only a temporary setback.

“That won’t solve our structural debt, deficit and money-printing problems,” Clark said. “So in the long term, this is nothing but positive for gold.”

By Allen Sykora of Kitco News; asykora@kitco.com

http://www.kitco.com/

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Gold hits all-time highs after Bernanke comments on stimulus

Jul 13 2011-2: 21 pm | 0 views | 0 Recommendations |

(Kitco News) - The Federal Reserve has indicated for the second day in a row, that further measures to stimulate the possible to help assist with the US economy are driving gold to an all-time high.

The Fed has announced not actually no new action and is still monitoring the economy, whether they are even necessary. But at the moment, the gold market is factoring in further humiliation of the US dollar, analysts said.

Messages that is thought the fed at least of more stimulus comes at a time when the yellow metal debt and political gridlock in the United States on the increase of the debt is reinforced ceiling already by European before of a beginning August target to avoid a default.

August gold has so far Wednesday at $1,588.70 an ounce on the COMEX Division of the New York Mercantile Exchange, a record for the most active contract reached. 1:08 Am EDT it was up to $23.10 or 1.5% to $1,585.40 an ounce. $18.60 Spot gold was higher at $1,585.90 an ounce.

The next obvious target for the market is oz the strong round of $1600.

"How have we been trade in the last few days, we (could be) five minutes," said Mike Daly, gold and silver specialist with PFGBEST.

The Fed said last month that it not on a third round of the purchases of government bonds in a move restrict long-term income, called quantitative easing which has been taken. The second round of QE June 30 ended. Minutes of the meeting of June 21-22 of the FOMC, published in the Tuesday afternoon, showed however that a minority is considering at least further action.

Then testimony confirmed Wednesday morning Federal Reserve Chairman Ben Bernanke primarily in Congress, that policy makers are considering more relaxation. He said that economic weakness may be more persistent than expected "implies a need for additional policy support.", he also said that the Fed is to look at several "untested" steps to revive the economy.

Markets went from think not not long ago it said further momentum so far very well it can think would Daly.

"It's called many things, but every form of printing money is obviously dilutive of the dollar and this is of course good for gold,", said Jeff Clark, precious metals analyst at Casey Research. "This is the main reason why gold is moved."

Of course the Fed has embarked on yet further impetus. Time will tell whether it is done.

"But an obvious indication that they are to look at it there." Let us say so, "Clark said. Later he added: "the markets are interpret as she probably will." "And that is why gold is up."

Not only gold is up and the dollar down, but the Dow Jones industrial average is around 120 points higher on the prospects for more stimulus measures.

Any further easing also added worry about inflation, said Daly and George Gero, Vice President at RBC capital markets global futures. Already, China tries the inflation fueled in part by high commodity prices added included Daly.

Mark Johnson, portfolio co-manager who dismissed USAA precious metals and minerals Fund, pointed out that the FOMC minutes Tuesday left the door released open for the fed to loosen or to tighten up policy on the road. Policy makers are considerable flexibility gave, he hit.

"I think you have the instructions for the underlying conditions to look,", he said. "And the business environment would claim basically will there be no tightening anytime soon."

This implies negative real interest rates further, which debases the dollar and created a favourable environment for gold, he said.

"If you, with the continued deterioration of the sovereign debt link problems in Europe, you have another driver for gold, since further to ensure the long-term viability of the euro in question people", said Johnson.

European financial officials who offers bailout loans while encouraging troubled Nations to carry out austerity measures. Analysts often describe on the net as "can occur on the road, the" effect, as countries are in the main bond money debt obligations to meet.

"she continue to the can on the street kick, but the can is getting bigger and heavier," said Johnson. "At some point if they it kick, they go to their feet to break."

Meanwhile, Daly said the market is from only a month or two of the time when it tends to draw seasonal gift holiday support. A number of important holidays occur in autumn in India, a major gold consumers followed by the Christmas season in Western countries.

The purchase of technical chart factors is acceleration, Gero said.

"It looks like we are before the race," he said. "The Bernanke comments play a role in getting the technical dealer and basic dealer involved."

The latest FOMC developments in the short and long term are bullish for gold, Clark said. But ", this does not mean that it is a straight line up to be," he added.

He and Johnson the metal said diving when Washington finally becomes an agreement on the debt reached ceiling, probably. "Every time if you take a risk factor of the table to mitigate gold would expect," said Johnson. Still, he and Clark said that this will be only a temporary setback.

"That will solve our structural debt, deficit and money printing problems is not," Clark said. "So in the long run this is nothing but positive for gold."

By Allen Sykora by Kitco news; asykora@Kitco.com

http://www.Kitco.com /.

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