With Euro Zone Crisis still at dire straits and China’s economic slowdown, it would not be improbable to expect undesirable news for the US economy as well. Regardless of the fact that US has been able to come out from the dark recessionary clouds these last five years but with stagnant  unemployment rate  and a sluggish consumer spending the  economy doesn’t seem to get better any soon.

The minutes of the FOMC general meeting on Wednesday, June 2012 came out with no good indications.  It saw the Fed’s lower their expected growth rate to just 1.9% to 2.4%; half a percent point lower than that of the April Forecast. If job market shows no improvements and a slow consumer spending still follows, the Fed will have to plan for new programs of bond purchases soon. The news will only come out on 12-13 September in the next meeting whether another round of easing or QE3 to be more precise, will take place or not. Investment firms have expected that if the next round of easing was there, it would be of around $500 billion!

The unemployment rate stands at 8.2% and the members do not expect it to fall down overwhelmingly any soon. They expect the economy could worsen if the congress fails to avert tax hikes and across the board spending cuts that will take place at end of this year. Tighter government spending could only slow the economy the members said.  

It seems like the meeting minutes did not make the market happy. Stocks fell in reaction to the minutes. With no clear signals of easing by the Fed’s, the US stocks saw a drop with Dow Jones Industrial Average sliding to a 48.59 points and the S&P 500 easing to a 0.02 points drop. The futures were also no different and are rallying down. The hard commodities were more reactive to the news. However, with the Fed likeliness of extending another round of easing, analysts say that the Gold prices could hit a record high of $2000 an ounce by the end of the year.  They suggest on staying bullish on gold as with new round of easing the metal will be seen as an inflation hedge.

But that is not until the September meeting of the FOMC. Till then it is hard to say whether or not the prices would rally higher. Some traders also believe that the price could fall for the next few months and could reach below $1300 an ounce. So it’s better to wait what news the Fed’s could have for the market. News can also come a bit early from the Fed Chairman Ben Bernanke, who could offer some indication of the Fed's plans on easing next week when he delivers the central bank's updated economic assessment to Congress.

Note: The blog is just an expression of the author’s opinion and cannot be deemed responsible for any losses incurred.