Unemployment Rate Drops - Too Little Too Late?

Fed still not impressed by a decent statistic amidst a recession.

On Friday the U.S. unemployment rate fell to 8.5% for December 2011 and according to general sentiment amongst money managers and economic analysts, the Fed still holds a strong interest in conducting another round of quantitative easing for a number of reasons: namely a still-too-slow of a growth in the domestic economy, Congress and the White House still not taking any decisive action (I reckon they've got more "important" things to worry about; like an election) and of course the still on-going debt crisis in Europe.

Analysts say that Fed policy-makers are looking for a more significant decrease in the jobless rate to support solid economic growth. Adding 200,000 jobs in December was not enough and economists are now stating that we need to add 250,000 per month in order to make any serious dent. My goodness. A quarter of a million per month?

According to Bill O'Donnell, head of Treasury strategy at RBS Securities says, “We have an activist Fed that’s chafing under ongoing weakness in the housing market and chronically high unemployment. By the summertime, we’ll be thinking about or even looking at a QE3. It’s reasonable just to do something. It’s very clear that Washington isn’t about to step up with some bipartisan grand plan, and something will need to be done.”On the other hand, James Bullard (St. Louis Fed), whose opinion is often listened to, the U.S. central bank probably won't start a new campaign of asset purchases because of the recently improved labor and manufacturing statistics. For those of you who don't know about Mr. Bullard, he was actually the first Fed official to ask for QE2 back in 2010.

So what's it gonna be? To QE3 or not to QE3. I'd like to say that we can cross that bridge when we get to it later next quarter, but the general investing public wants to know SOMETHING now so they know what to invest in NOW. Analysts say that unemployment will be the 'key indicator' watched by the Fed and although that gives us something to go off of on a month-to-month basis, we investors need a little more meat in our news meal.

For now, I strongly believe that the Fed, unimpressed by what I think was a decent ride for unemployment, may have actually 'strongly' hinted at a QE3 and that kind of borderline rumor tends to scare investors away from the money markets that some analysts purported them running to at the end of 2011. In other words, I think that on a fundamental news level (yes I'm kinda answering the question at the end of Gerald Williams 1/6/2012 blog here), things look pretty good for gold for now and that may be just enough to drive yellow metal prices through some or all of the resistance levels established by recent technical interpreters over the next few days or weeks.

Keep up the good fight,

- Patton

*****

Disclaimer: The author has made every effort to ensure accuracy of information provided, however, neither this hosting website nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. The hosting website and the author of this article do not accept responsibility or culpability for losses and/or damages arising from the use of this publication.