On September 30th we wrote (click here) of the “hard money inclinations” of the Republicans and how a electoral victory may put pressure on the Federal Reserve to reign in their money printing. On election night, we also posted the “Fed to Face Short Squeeze in New Congress” (click here and here).
The squeeze is on. After a storm of foreign criticism of QE2, Congressman Mike Pence introduced a bill yesterday to limit the Fed’s mandate to just price stability. Today, the Republican leadership, including, “Young Gun,” Eric Cantor, published a letter to Fed Chairman Bernanke expressing their concerns over QE2. It’s very unlikely legislation limiting the Fed will become law, but the recent uproar will embolden the dissenters on the FOMC, which may affect future monetary policy.
Meanwhile, gold has been hit by the trifecta of: 1) international and domestic pressure on the Fed; 2) fears of China tightening; and 3) European Sovereign Debt risk aversion. The 50-day moving average is providing support, but we are patiently waiting to see if the October 22nd low of 1315.5 will hold. If not, it significantly increases the probability of a deeper correction to $1220, the 200-day moving average. Stay disciplined and stay tuned!
Dear Mr. Bernanke: No Pressure, but…… – NY Times
Bernanke Seeks To Reassure US Senators On Fed Policy – WSJ
Pence Introduces Bill to End the Federal Reserve’s Dual Mandate – GOP.gov
Fed under siege in new Washington landscape – Marketwatch