Commodity prices have risen in recent trading as speculators are banking on the Federal Reserve to announce more quantitative easing at the September 13 Federal Open Market Committee meeting.
The exchange traded fund gold, SPDR Gold Shares (NYSE: GLD), and oil, United States Oil (NYSE: USO), have both surged since early July. This is noteworthy as the major economies in the world, the United States and China, have declining economic growth. Based on that, oil should be declining in price due to basic supply and demand issues.
It is likely that there will not be any major announcements or initiatives so close to the November elections. Federal Reserve Chairman cannot be accused of doing anything to influence the election. Every action of Bernanke can be interpreted politically as it influences the markets, and thus the American votes.
The United States economy definitely needs help. Economic growth is falling and unemployment is rising. Last August, for the first time in history, the United States was downgraded. Nothing that resulted in that downgrade by Standard & Poor’s has been rectified.
That the United States needs more quantitative easing should be a bearish indictor for the markets. But the stock market rallies upon weak economic data under the assumption that more quantitative easing will be forthcoming. When that happened with Quantitative Easing 1 and Quantitative Easing 2, the Dow Jones Industrial Average rallied. Due to that factor, it is doubtful is the Federal Open Market Committee meeting will result in any actions that could move the markets, and thus tilt the elections towards one party of another in November.
After the Federal Open Market Committee gathering in November, it is likely to be a different story.