Is there nothing more than the Fed? Please, let's get real

So, let's get real please...

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Gold is down to a critical support level. A Break of here opens 1,280 below the 200 weekly at $1,291.67 and $1,250 and then the 11th June weekly lows. The DXY is down a little today, off the recent 96.26 highs trading between the weekly highs of 100.51 and lows 91.92. Meanwhile the Fed's fund rate is about evens after a spell back in June that had pretty much written off any possibility of a Fed hike in September, let alone this year.

So what exactly has happened since May, June and to now? What is the market using to factor in a flip of a coin scenario where the Fed could possibly hike rates? If you ask me, the markets are a shambles at the moment, fixated on the Fed and whether they will hike rates in September or December or even both in September and December. Well, so what if they do?  

Will a rate hike or two of a maximum of 50 basis points going to make all the problems that the US economy is facing to go away? Will a couple of rate hikes mean the dollar will be saved and that gold will not be heading higher again at some point in the near future - no, absolutely not!  If you ask me, a rate hike or two is simply the Fed's usual course as we head into elections and a new administration, and is always exactly the thing that makes the situation in the US economy a whole lot worse for the next administration to deal with. Anyway, I really don't think the Fed will hike rates, but if they do, it doesn't mean I'm wrong about the economy, it just goes to show how foolhardy and moronic the Fed really are.

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The only thing that has got the market back to evens about a rate hike is the fact that Fed speakers have been piping up of late, advocating for rate hikes, well, actually they are just saying that it is possible that the conditions are apt for a rate hike because there has been an improvement in the US economy over the last few months. Really? Well, even if there has, and let's say that the Atlanta Fed, that usually get it wrong, get it right, and that the GDP for the third quarter is going to be above 3%, when you average that out across all the previous dismal quarters, the growth rate in the US economy is still close to technical recessionary numbers and if the Fed would actually use a more realistic measure of growth and inflation, I think you will find that the US economy is already in a recession. 

The Fed has trapped the US in a stagflationary environment and there is no easy option. So, instead of concentrating on a time-line of rate hikes, what we should be focusing on is the decimation of high paying full time jobs and the proliferation of lowly paid part time service sector jobs along all the voter frustration in a lousy economy. We now even have Williams advocating for higher inflation and larger government deficits when productivity growth in the last few quarters hasn't been this week since the Jimmy carter years - This is just a nonsense. 

Source: iStock

In fact, I think rates may even go negative once the elections are over at some point next year. Therefor, long gold, short the dollar and buying on long squeezes. That is not to say that one should be 100% of your money in to such a portfolio, as crazy as these times are, anything can happen and until gold breaches $1,500 and 2012 lows, it remains in a reversal that still has mileage to cover before longs are fully out of danger. Still, while trading above 92 on the DXY leaves the greenback in a favorable consolidation of the rally from 78, but there is a lot more room to the downside than there is to the upside, and quite frankly, the fundamentals around the globe do to not support more upside in the greenback - It is simply unsustainable.