The recent monthly reports out of Washington combined with the major announcement of the Federal Reserve last week have already led to a jump in the gold market and has all the indications that trend will continue. Posted by James Randolph on December 05, 2011
Federal Policy Will Lead to Growth in Gold Market
December 5, 2011 – The recent monthly reports out of Washington combined with the major announcement of the Federal Reserve last week have already led to a jump in the gold market and has all the indications that trend will continue. While few saw the Federal Reserve’s announcement last Wednesday coming at that time, everyone saw gold’s spectacular performance in November. Gold rose 1.8% in November alone and showed a 20% profit for the year.
The recent, discouraging numbers coming out of Washington hint that gold has a long way to go as the signs of a faltering economy are trickling down into the employment numbers, low housing numbers, and stalled growth. We have now seen the lowest consumer confidence since the first quarter of 2009, and we all remember where the Dow was in March of 2009. And while there is no need in this environment to theorize about exactly how ludicrous the modus operandi of Ben Bernanke and his kind can get, it is worth considering that the fiscal stimulus domestically is tied to housing prices. In other words, Bernanke, as a policy, seems to have been attempting to resurrect the housing industry through quantitative easing. Clearly, that has not been successful, but that hasn’t stopped him from throwing even more paper money in the hole to keep the industry on life support.
ConvergEx has said, “If it costs a QE II to get the 3.5% bump in real prices, or even a QE IV, then markets should not doubt that the current Federal Reserve will seriously consider it.” Of course, any quantitative easing, or wanton printing of US dollars is incredibly good for the gold market. Gold started its current rise in price about a decade ago, but really popped and went, at times, parabolic with the quantitative easing programs here in the US. We have every reason to think, based on the economics and on past history, that any future quantitative easing will benefit gold.
And every move the government is taking, including this week’s Federal Reserve decision to lower swap rates for US dollars between the major central banks of the world, is an indication that it’s business, or what passes for it, as usual in Washington and will be for some time. The president’s approval rating is sickeningly low and the unemployment numbers are getting ugly and will surely get worse after the holidays. Whatever fiscal policy the government takes in order to contend with these huge issues, it is highly unexpected that they will diverge from the course of action of the past years. In such a scenario, gold is a very clear winner and the gold market will be where the good action is.
Senior Staff Writer – Certified Gold Exchange