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.

Barrick (ABX) (GG) (NEM) Jump on Stimulus Expectations

Gold giants Newmont Mining (NEM), Goldcorp (GG) and Barrick Gold (ABX) jumped on Friday after the August nonfarm payrolls report revealed a dismal month, with an anemic 96,000 jobs created, far below the 125,000 analysts were looking for.

Other commodities and related companies jumped as well, as it pointed towards the likelihood that Ben Bernanke and the Federal Reserve will institute another round of quantitative easing in hopes of jump starting the economy.

As for gold itself, on the Comex division of the New York Mercantile Exchange, the most active contract for December deliver jumped $34.90, or 2.1 percent, to settle at $1,740.50. The last time gold settled that high was on February 28.

If Bernanke does pull the stimulus trigger, when coupled with the potentially unlimited bond-buying program launched by the ECB, gold, silver, and other commodities will soar again in response.

But even if the Fed decides to wait till later in the year, it appears a floor has been placed under the market for now. The longer nothing else is down though, the shakier that floor will become.

Bernanke and the Fed probably only have one real shot left at making it appear they can do something to help the economy recover, so while it's probable there will be some type of stimulus offered next week, it's also possible the decision will be made to wait a little longer.

That would put some downward pressure on gold and silver, along with other commodities in the near term, but it probably won't take long to recover once investors realize it's only a matter of when, and not if, the stimulus will come.

Stocks on the other hand will get crushed if nothing is done be Bernanke.

Barrick Gold closed Friday at $40.16, gaining $1.16, or 3.0 percent. GoldCorp ended the session at $43.00, up $0.86, or 2.0 percent. Newmont Mining closed at $51.69, rising $.79, or 1.6 percent.

Fed Awaits ECB and Payrolls Reports

The Thursday meeting of the European Central Bank (ECB) is vitally important to the Federal Reserve and Chairman Ben Bernanke, as the promised response to the ongoing debt crisis in Europe will be a large part of what the Federal Reserve may or may not do at its meeting on September 12 and 13.

Ever since ECB President Mario Draghi promised to taek whatever action was needed to attempt to solve the debt crisis, it has placed support under the markets, which have awaited to see exactly what it is Draghi will do.

Also of importance to the actions of the Fed will be the payrolls report due on Friday, which will surely have a major impact on the decision of the Federal Reserve and Ben Bernanke going forward.

Already one major element has ramped up the possibility of QE3, which was the disappointing manufacturing numbers recently released by the Institute of Supply Management, which showed manufacturing in the U.S. contracted by the most in over three years. Some think this could be enough for Bernanke to pull the trigger next week.

If payrolls drop below 125,000, which appears to be the targeted number for a decision to be made, then it's very likely Bernanke will implement another round of quantitative easing.

A secondary element in the mix is exactly what the ECB does decide to do. If it's significant and deep, Bernanke and the Fed may get some wiggle room to wait till later in the year to throw more money into the U.S. economy.

While the typical reporting that opposition in Europe could suppress some actions, the recent past has proven that to be more political posturing for the sake of constituents, especially in Germany.

In the end, of the ECB implements strong measures, it will without a doubt pass again, even while the press reports it as being opposed by some in the euro zone.

Jim Rogers Likes Silver More Than Gold at This Time

Billionaire commodity expert Jim Rogers reiterated his current stance on gold, saying he's looking more towards silver than gold as the better investment at this time, citing the fact that silver is down more than gold, and gold has also had a decade of increases, which means it is susceptible to a major correction.

As measured by an historic basis, silver is about "40 percent below its all-time high," says Rogers, adding that "gold is 10 percent to 15 percent below its all-time high."

In other words, he sees more upwards potential.

Even if there is more stimulus around the world, which is highly likely, and if gold gets a boost from that, silver is likely to get an even bigger boost from stimulus, especially as it would at least appear to renew industrial demand from manufacturers around the world.

Gold would benefit mostly from the safety and defense against inflation factors, while silver, on a secondary basis, would also benefit for the same reasons.

ECB Making Plans for Bond Acquisitions

In the short term the announcement by ECB President Mario Draghi that the European Central Bank drew a yawn from the markets after his aggressive posturing recently on how he'll do anything to support the euro.

"The Governing Council, within its mandate to maintain price stability over the medium term and in observance of its independence in determining monetary policy, may undertake outright open market operations of a size adequate to reach its objective," said Draghi.

"The Governing Council will consider further non-standard monetary policy measures according to what is required to repair monetary policy transmission. In the coming weeks we will design the appropriate modalities for such policy measures," he added.

The Federal Reserve is also expected to make a move at its next meeting in September, as Chairman Ben Bernanke noted in the recent meeting that the U.S. economy was faltering and the central bank stands ready to take action when needed.

What this means is come the latter part of August and early September we should see a big upward move in stocks and commodities in response to the two probable initiatives by the ECB and the Federal Reserve.

The move by the ECB will probably be very close to the same move by the Fed.

With little reason for Bernanke waiting, it appears he's caved to pressure to wait until it could make the economy look better as the election approaches, giving a potential boost to Obama, who is in danger of losing the election in the midst of the disastrous economy and his atrocious economic policies.