The shenanigans continue! There is a bit to unpack here so I apologize in advance if this post comes out in rant form. Today the Federal Reserve of the US cut interest rates by 50 Basis Points which is a large-ish cut that you might not expect unless there was a Crisis or Recession. I personally expected the first cut to come in July and be 25 Basis Points, so I was a couple of months early but this still fits in my window of expectation. This cut is probably safer from a timing perspective and is large enough to do the job intended.
Source
It is my belief that this cut is needed to head off a Recession a bit longer and keep the financial markets liquid and in reasonable shape heading into the US Election. For all the talk of the Fed being independent you only have to look at the comments of politicians to see that it 'aint. A few prominent Democrats applauding the move while Republicans criticize it...but whatever, this post isn't intended to be about politics so I'll leave that part there. I'll just summarize in pointing out - I have been expecting this move.
A rate cut here will take some pressure off the indebted citizens and businesses in the US economy. It'll likely give a bit of a boost to the markets and give those who might be struggling to pay their mortgage a bit of relief. All good things and warm fuzzies all-round...except that there is a cost. Inflation is likely to get another bump, but that's the beauty of the timing here. Inflation lags interest rate moves and so we might not see a resurgence of inflation for another 3 or 6 months. Plenty of time to give everyone a sugar hit and get the election done while the "Everything is wonderful" illusion stays in place.
What I'm really looking at today though is the price of Gold and Crypto. Easy Money and a return of the Liquidity Hose (with it's subsequent inflation) is going to be great for Precious Metals and alternative monetary investments like Crypto - which is where I am positioned. You can see the chart I've posted has a spike of the Gold price to $2600 - a new record high. So the market reacted initially...but that brings me to my next point.
Almost immediately after the spike in Gold it has sold off even harder. This is obvious "Sell the News" behavior from the market which clearly shows the insiders knew this big rate cut was coming. The game is rigged my friends and you need to know NOT to trade on the News Headlines. You've got to be one step ahead. Understand what's going on and see them coming.
Personally I am comfortable that we will see Gold continue hitting new highs in the months ahead and Crypto is right on track to have a good run too as we get closer to 2025. It's certainly a clown show at the moment so I hope you have your popcorn ready and a nice comfy position.