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June 18th Early Week Silver Market Update

Gold and silver were trading down in the early parts of Tuesday while most of the world fixates their attention on the beginning of the latest Federal Open Market Committee meeting in the United States. This particular FOMC meeting will carry special significance as the future of monetary policy in the United States may be decided by it. We will also be taking a look at both European and Asian stocks to see if they can improve on what has been a horrid last few weeks. Expect a quiet day of trading from all areas of the world as most people will be awaiting the outcome of this FOMC meeting before they decide to do anything with their investments. The US Dollar Index is coming in lower on Tuesday, back down to around a 4 month low, the likes of which it hit at some points last week.

FOMC Meeting Details

The Federal Open Market Committee is the group of people who more or less decide what monetary policy in the United States is going to look like. Up until now they have been employing a tactic known as Quantitative Easing. QE works by pumping a lot of money into the economy each month in an effort to bring the value of the US Dollar down. Devaluing our own currency may seem counter-productive, but what it really does is make our exports cheaper so that other people come in and but them, thus stimulating our economy. Up to this point QE has done a good job of helping the US recover from the 2008 recession, and for this reason many people believe that it is no longer necessary to keep around.

The FOMC is tasked with deciding whether or not QE should be kept around, and if it shouldn't, this meeting has to determine how and when it will be done away with. Currently we are seeing an almost even split of people who want QE to be done away with and people who would like to see it kept in tact. As of now there is no clear picture of what is going to happen, though I feel as though the FOMC might employ some sort of winding down of the QE policy we are currently witnessing.

The Wall Street Journal agrees with this in a publication released yesterday where they stated that the best option for the FOMC to pursue is to taper off QE over the course of a few months. They said that tapering off the current monetary policy will allow interest rates to stay low and not have any unwanted effects on the US economy. In Ben Bernanke's post-meeting press conference we will hear the final decision, but unfortunately that will not happen until Wednesday afternoon. Up until then, all you will hear is investor speculation about what they think can, should, and will happen during the course of this meeting. All in all, this is one of the most important FOMC meetings in recent history.

Rest of the World News

The euro currency has done well so far this week, after receiving further help from a strong consumer confidence report out of Germany.

Japanese stocks slipped a little on Tuesday, but at this point any daily losses under 5% are going to be viewed as small victories for Asian investors. The Japanese Nikkei Index will be heavily watched due to the fact that popular opinion places the Nikkei Index as the stock market that will influence how other stock markets around the world will act going forward.

Posted in Market Updates

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