The gold market had an interesting reaction today after Ben Bernanke, Chairman of the Federal Reserve, appeared before the House Financial Services Committee. Posted by James Randolph on February 29, 2012
Gold Market’s Reaction to Fed Speak
February 29, 2012 – The gold market had an interesting reaction today after Ben Bernanke, Chairman of the Federal Reserve, appeared before the House Financial Services Committee. The Federal Reserve is responsible for the monetary policy in the United States and any official declaration made by its representatives, not necessarily just the Chairman, are major signals to the markets.
The market reaction was less than welcoming by all accounts. Proponents of the fiscal stimulus policy we know and call Quantitative Easing are still wanting after Ben Bernanke has said those waiting for QE3 will have to wait a little longer. There have been two major rounds of fiscal stimulus under the name of Quantitative Easing thus far, and both in the mid to long-term have been very influential in the rise of gold and silver.
Quantitative Easing amounts to an inflationary regime. Ben Bernanke is commonly known as “Helicopter Ben” by those critical of his monetary policy because all he seems to know how to do is print money. All humor aside for the moment, the massive endeavors of printing money has caused a serious devaluation in the dollar that we have only begun to see and understand in real terms. When that train comes into the station, the gold market will be fantastically more popular than it is today.
We will be experiencing the effect of the monetary policy by the Federal Reserve for many years to come and, barring raising rates, which they seem unable to do, the effect will manifest very painfully in a rise in cost of everything you and I need to live and to survive. The United States gets zero oil from Iran. Yet, the price of oil is rising. Partially, this is due to the value of the dollar losing ground on a daily basis, as only one example.
While the initial reaction to Ben Bernanke’s comments was a marked drop in gold and other precious metals, it is mainly sentiment driven and appears to have already leveled off by the time of posting. Truly, it is an opportunity to buy gold while the dip is in effect as the policy of the Federal Reserve has not changed fundamentally in any way. They will continue to print money, and Ben Bernanke’s comments reflect that position. The gold market is the ultimate winner in the current game of printing money and it would be the wisest and most prudent investment to buy as the dips occur, such as today.
Senior Staff Writer – Certified Gold Exchange