FX Street: Central Bankers Pull Out Their Monetary Bazookas to Try to Avert a Coronavirus Crash

February 04, 2020

Article by Stefan Gleason in FX Street

The emerging coronavirus pandemic is already crimping global commerce. In response, the S&P 500 has thus far put in two weeks’ worth of declines (the index fell 2.1% last week) since making new highs to start the year.

Even though the U.S. stock market hasn’t even entered a true “correction” phase yet, Wall Street is already clamoring for more Fed stimulus.

Mainstream stock market mavens figure the central bank will step in to limit downside – and they are probably right.

The Fed now appears likely to re-embark on a rate-cutting campaign in the months ahead.Meanwhile, it continues to pump liquidity into the Treasury bill and repo markets.

 Last week, the Federal Reserve Bank of New York pushed another $83 billion into short-term lending facilities.

In China, central bankers are hitting the panic button and pulling out their monetary bazookas. The same could be said of U.S. authorities.

Ongoing official back-stopping has made investors more complacent than ever. But the interventions haven’t stopped gold from rising.

Last week, gold quietly posted its highest closing price since 2013. Yes, gold is in a bull market even though virtually nobody in the mainstream financial media is talking about it.

The media will take notice when gold makes a new all-time record high – which could come later this year if it keeps up its current rate of ascent.

The biggest beneficiary of that attention could be silver – the poor man’s gold, the metal the masses will turn to as they seek inflation protection.

The silver market is like a coiled spring. It has been depressed for many years. When it finally does break out, it is poised to jump in a very big way.

To read this article in FX Street in its entirety, click here.

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