A bombshell in the shape of the minutes of December’s Federal Reserve Open Market Committee meeting dropped on Wall St this afternoon, causing stocks and precious metals to drop sharply in thin trading while the dollar shot to a one-month high.
The minutes revealed a hitherto unknown rift in the committee over the duration of the present quantitative easing measures, at the same meeting where it was officially declared that the bond-buying would go on indefinitely until unemployment dropped to 6.5% or until inflation projections exceeded 2.5%.
More than one official was recorded as expressing doubt as to the effectiveness of continued quantitative easing of $85 billion a month, and concern whether the Fed w0uld be able to divest itself of the nearly $3 trillion already on its balance sheet. Several members were on record as advising a scaling back or even complete halt to QE before the end of 2013. This information sent gold, already backing off the recent highs, sharply lower. Silver, having more industrial uses in an expanding economy, was not hit as hard, though still taking a hit.
It should be kept in mind that the last FOMC meeting occurred when everyone thought that a “grand bargain” would be struck over the fiscal cliff, and the U.S. government would begin showing more fiscal responsibility.