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Thursday, September 13, 2012

Gold Prices in QE3 Environment

Now that Ben Bernanke and the FOMC have implemented another round of quantitative easing - one that could go on indefinitely with the promise to purchase $40 billion in mortgaged-backed securities on a monthly basis - gold and silver prices are about to go ballistic, as there's absolutely nothing in the way now to keep them from resuming their upward climb.

Gold shot up by over $38 an ounce on the news, while silver climbed over 4 percent in response to the highly anticipated move, which was more aggressive than thought by most.

The U.S. dollar is about to reverse directions, set to weaken in response to the stimulus move.

As for gold in general, there is nowhere for prices to go except up, at least until there is a reversal in job numbers in the U.S., which could take years to improve if we are to measure it by the prior response to QE1 and QE2 by the U.S. economy.

What has been a volatile and unsure economic environment because of there being no response from the Fed in the recent past concerning more stimulus, has now become much more stable in the sense of knowing what is coming from the central bank in the near and long term.

That will result in investors moving into commodities in droves as they seek to protect their assets from inflation and the falling value of the U.S. dollar.

In the short term we'll also see a big boost in the equity markets, but that has a lot more risk to it with stimulus than commodities do.

Barrick Gold jumped, trading at $1.50, up 3.78 percent, as of 2.51 PM EDT. Silver Wheaton was at $38.22, up 2.00, or 5.52 percent, as of 2:52 PM EDT. Goldcorp (GG) was trading at $45.17, up $2.11, or 4.90 percent. First Majestic Silver was at $21.91, up $0.87, or 4.13 percent.

1 comment:

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