The Fed bases its hawkishness on its anticipation of continued strong economic growth and increasing inflation. Peter said it has it half right. Inflation is going to continue to increase. But the central bankers don't even really have that right. Peter says inflation is actually going to go up faster than projected. The bottom line is that the Fed isn't going to be able to push through all of these rate hikes.
The Fed is not going to be able to deliver the rate hikes the Fed is expecting, and again, it's the expectation of more rate hikes that is what is keeping the lid on the price of gold. But it's only a matter of time before the market blows the lid off and the price of gold goes up."
Peter said gold is basically trading sideways right now, in advance of a breakout. Meanwhile, the dollar is doing the same thing in the other direction. The greenback is weak but not breaking down. On the other hand, it isn't recovering any of its losses. Peter thinks it's treading water right now before it heads lower again.
The Atlanta Fed dropped its Q1 GDP estimate twice last week. It is now projecting a 1.9% growth. Peter said that's probably going to be the high-water mark for the year.
Q1 had all the hype in it, all the anticipation of the tax cuts, the big build in inventories. Despite all that, we're barely getting any growth in Q1 and because I think we had to pull growth forward from Q2 in order to get a pathetic 1.9, or wherever it's going to be for Q1, then Q2 is going to be a lot lower because we've pulled that growth forward. And that just blows up this whole bullish scenario of 4 or 5% economic growth."
- Source, Seeking Alpha
