The Gold Market & The Economy Posted by James Randolph on November 05, 2010
November 05, 2010 – As expected, the new round of stimulus – called QE2 – has already spurred gold investing to a whole new level. Announced after the close of trading in New York on Wednesday, gold soared to record levels the very next day as the dollar plunged.
Other nations, particularly those with emerging market economies, were quick to see the threat and can be expected to take decisive action at the first sign that the dilution of the dollar is sparking inflation in their currencies or creating asset bubbles in their markets. Here at home the stock market also surged, maintaining its unusual inverse correlation with the dollar. With the market already perilously overvalued, something has to give.
QE2 is little different from the first round. In essence, our central bank is lending the government some $600 billion to buy Treasury bonds in the belief that expanding the money supply will spark growth in the economy. Printing that much more currency is a huge gamble weighing the considerable risk involved against the questionable benefits received from similar actions in the first round.
The simple truth is that our policy of printing vast sums of money while our debt spirals out of control is of grave concern to foreign nations, especially in Asia. With our balance sheet already some $200 trillion in the red, the time will soon come when there will be nobody left who is willing to pick up our IOUs.
As the dollar plummets, the government will be left with very few options to ward off hyperinflation. Faced with a choice between gold confiscation and total financial collapse the action it would take is clear. Investing in certified gold coins minimizes that risk while providing the well known protection of gold investments against dollar devaluation and inflation.
Senior Staff Writer – Certified Gold Exchange