FED WILL HAVE AN URGENT MEETING ON MONDAY ARPIL 11

The Fed has just issued an urgent notice to discuss about rates on Monday, April 11. Here's the notice:

The last time it happened was in November 2015 and we had our 25 basis point increase in December 2015.

This notice came on the heels of the latest revision of the GDP by the Atlanta Fed. The GDP for Q1 2016 has been revised down to +0.1% on April 8. Three days earlier (April 5) the Atlanta Fed put the revised GDP at +0.4% after a string of disappointed data. Just two months ago the Fed was optimistic that the Q1 2016 GDP could reach 2.7%.

The above is an indication that the US economy is unraveling fast.

What could transpire in the meeting?

If the Fed cuts the interest rate by 25 basis point then we can expect the US$ to weaken, putting pressure on both the ECB and BOJ. The recent NIRP and expansive QE  by ECB and BOJ had nothing to show other than the economies of Europe and Japan being back where they were before both central banks unleashed their "highly touted and cheered" (pun intended) policies.

So we can expect the Euro and Japan to strengthen, which will be detrimental to both the EU and Japan economies. The market may cheer the Fed and stock markets will move up as they did often times whenever a central bank becomes dovish, but reality will set in and the EU and Nikkei indices will likely to trend lower in the ensuing weeks as the exports from EU and Japan fall. So will ECB and BOJ cuts interest into deeper territory and even more QE? Can't anyone see that this is a vicious circle that sees no end?

If the US$ does weaken, we could see commodities and precious metal prices rise. Oil will rise as an immediate response. I will therefore exit any short positions in oil, oil related counters and ETFs on Monday (better be safe than be sorry)

Physical gold and silver and related ETFs as well as miners and miners ETF could trend higher as a result of any interest rate cut.

Financials could take a hit as lower interest rates means lower income form loans and mortgages.

What is more concerned is another wave of borrowing binge as companies and individuals extend their leverage beyond their ability to pay. No matter how they play it, a recession will ultimately be the outcome. The economy cannot be on an "up" trajectory forever.

If the Fed surprised everyone and increase interest rates, then we know they are departing from the norm of the ECB and BOJ. The US$ will strengthen in this scenario. This could provide support to the ECB and BOJ's policies. However, China, which is on the verge of a debt crisis, will definitely devalue the Yuan, thus putting the US in a quandary.

All this will create greater global uncertainties and as long as uncertainties and fear of risks prevail, precious metals could thrive.

Forget about the media linking the US$ and gold as being inversely related. When the Fed was raising interest rates to the double digits from 1976 to 1980, US$ strengthened but gold also went up an astounding 325%! So you see there is no clear co-relation between the two.

The above is just my opinion. You are encouraged to do your own research and analysis.