The Federal Open Market Committee (FOMC) of the Federal Reserve System holds eight scheduled meetings in a year. The results of these meetings provide not only trading opportunities, but also extremely valuable data points for investments. The June 19 to 20 FOMC meeting is upon us.
As always, there is a wide variance among expectations by experts as to what the FOMC will do. The fact is that nobody other than perhaps the FOMC members knows the likely results of the meeting. Experts are simply guessing.
It pays to make an attempt to figure out how a majority of participants are positioned in various markets ahead of the FOMC meeting. If results of the meeting are in line with the positioning of a majority of participants, typically there is no trade. On the other hand, if the Fed statement is quite different from the positioning, there can be a violent reaction offering opportunities.
Interestingly, sometimes participants in different markets are positioned differently.
We use a variety of techniques to make an estimation of positioning before the Fed meeting.
Gold And silver
Gold and silver markets are positioned for QE3. In the present environment when interest rates are close to zero, QE (quantitative easing) is simply another way to reduce the cost of money. The Federal Reserve has already engaged in two quantitative easings, hence the name QE3 for the next potential easing.
In quantitative easing, the Federal Reserve increases the credit in its own account and then uses the new money to buy assets such as government bonds…Read more at MarketWatch