Wednesday, January 3, 2018

Stocks Advance to Start 2018; Gold, Silver Rallies Continue

Stocks ramped higher at the opening of the first trading session of 2018, continuing a trend that carried equity investments to major gains in 2017.

At the same time, gold and silver continued their impressive three-week-old rally. Silver has been the out-performer of the pair, rising from a low of 15.67 per ounce on December 13 to 17.15 as of the close of trading in New York on Tuesday. Gold crested above the sticky $1300 level, finishing the day at 1317.10. It also bottomed out on December 13, dropping below 1240.90 on that date.

While there's certainly nothing unusual about stock gains, the rally in precious metals is raising some eyebrows and prompting talk of future Fed rate hikes and incipient inflation, which has been a false flag for eight years running.

On Wednesday, investors may get some indication of the Fed's intentions. Minutes from the December meeting - at which the Fed raised the federal funds rate for the third time in 2017 - are to be released during the session. Of particular interest is the discussion over rate increases and any dissenting opinion.

The Fed has made it clear that they intend to continue raising rates this year, with four increases of 25 basis points the proposed path. At the same time, the Fed will continue to unwind its bloated balance sheet, shedding billions of dollars worth of treasury bonds and mortgage-backed securities (MBS) and increasing the rate of disposal as the year commences. By October, the Fed is supposed to be dumping as many as $60 billion worth of notes, bills and bonds.

The combination of a general tax cut for consumers, a large tax cut for corporations, rising rates, bond dumping, and an improving economy suggests a formula for inflation, which is generally understood to be good for gold and silver, though the rise in precious metal prices may have more to do with currency debasement than a knee-jerk response to the economic climate.

At the Close, Tuesday, January 2, 2018:
Dow: 24,824.01, +104.79 (+0.42%)
NASDAQ: 7,006.90, +103.51 (+1.50%)
S&P 500 2,695.81, +22.20 (+0.83%)
NYSE Composite: 12,902.72, +93.88 (+0.7329%)
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