Awaiting Fed with baited breath

Genevieve Signoret

Needless to say, I await the Fed’s monetary policy statement and Chairman Bernanke’s press conference with baited breath. We took something of a risk in our research report to clients last week predicting that the Fed would not hint at (raise hopes of) a QE3 today. So they had better not hint at it.

If they do, gold will probably bounce on inflation fears (that, in my view, would be unfounded). Actually, gold could bounce even if they do not, on double-dip fears (that, in my view, are plausible).

We’re well inside the consensus in our view that the end of QE2 in eight days will not move markets. Some market stategists whose newsletters we read believe that this end to QE2 could hurt gold. This would be more plausible to me if the Fed were intending to immediately shrink the balance sheet. But it’s not. It will merely cease to inflate it.

Bernanke’s press conference is at 1:15 PM Mexico City time, 2:15 PM in New York. You can watch the press conference live.