Silver Wheaton: Get In Before Fed Actions

Last week’s cuts by the European Central Bank (ECB) played a significant role in the sell-off in the price of silver. Using iShares Silver Trust (SLV) as a proxy, the price of this commodity dropped by over 4% before recovering somewhat heading into the weekend. The turbulence in the commodities markets has dramatically ticked up over the past several weeks, and shows no signs of slowing down. Recent comments by the Federal Reserve have indicated that the U.S. economy continues to show signs of weakness, and that Fed action is on the horizon.

Where Does The Fed Stand?

The Fed’s position is articulately and succinctly outlined in a recent article by Marc Courtenay. What Mr. Courtenay refers to as a “Lehman Moment” — another instance of significant instability in a major global financial institution — remains a possibility. Furthermore, a close reading of the Federal Open Market Committee’s (FOMC’s) minutes from last week reveal that the U.S. central bank is moving rapidly towards taking additional action.

Additionally, Mr. Courtenay points out that this position is in the main stream when he quotes The Wall Street Journal article titled, “Fed Weighs More Stimulus”: “Fed officials expressed worry about risks to the American economy stemming from the euro-zone debt crisis, the possibility of a ‘significant slowdown’ in China’s economy and the prospect of deep U.S. government spending cuts and tax increases…”

An additional factor impacting a likely Fed move is the fact that it is an election year, and the state of the economy will absolutely be a central issue.To continue reading, click here.

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