Bernanke Lights a Fire Under Gold and Silver Prices
“Party on!” was Federal Reserve Chairman Ben Bernanke’s message to Wall Street yesterday, as he announced that the Fed will be keeping interest rates at “exceptionally low” levels until late 2014, owing to concerns about stubbornly-high unemployment and the sustainability of the current statistical recovery. Bernanke also confirmed that for the first time in the Fed’s 99-year history, the institution will explicitly target a 2% inflation rate, as measured on the Personal Consumption Index (PCI). Other central banks have long had explicit inflation targets, but not the Fed.
Unsurprisingly given their enthusiasm for easy money, the market response to this move was euphoric. The Dow gained 0.64% to settle at 12756.96, while the Nasdaq tacked on 1.14% to settle at 2818.31. Asian and European exchanges have also reported gains this morning. Commodities such as copper and crude oil are up, while precious metals – ever sensitive to signs of more monetary easing from the Fed – notched impressive gains.
The gold price blew through overhead resistance around $1,680 with ease, and is now trading back above $1,700 per troy ounce. Silver broke through the $33 mark easily, which could be technically significant given that the price has been encountering stubborn selling around $32.50-$33 since last autumn. If silver can break through $35, and if we see signs that hedge funds are at last beginning to grasp that both the Fed and the European Central Bank are committed to more-or-less perpetual money printing – whatever euphemisms they may use to disguise this fact – silver has a real chance of starting the kind of trending move higher that we saw in late 2010/early 2011.
The flip side of this particular coin is of course renewed weakness in the US dollar. Significant risk rallies since the crisis of late 2008 have always been accompanied by a falling Dollar Index, and yesterday was no exception – the USDX falling below 80. As of 10.20GMT, its down at 79.21. Looks like we could be at the start of another one of those periods when the markets forget all that’s wrong with the world and bid up just about everything except the greenback and US Treasuries.
If the USDX continues falling towards its all-time low around 72, expect further gains in gold and silver prices, and expect silver to outperform gold as US inflation expectations rise. This will make a formal announcement of “QE3” from the Fed or nominal GDP targeting less likely in the short run, as the falling dollar and rising prices in America obviate the short-term need for more aggressive Fed action. That is until we get the next bearish downturn accompanied by falling stock markets, commodities, and a rising dollar, when the Fed will again engage in more efforts to weaken the dollar against other currencies in order to gain export advantage for the US economy.
“Rinse, lather and repeat” as they say. Of course, central banks can devalue their own currencies, but they cannot devalue precious metals.
- The Last, Great Run For The U.S. Dollar, The Death Of The Euro And 74 Trillion In Currency Derivatives At Risk
- Are you ‘over-connected’?
- Earth-directed solar X-flare March 11
- Rate Of Climate Change To Soar By 2020s, With Arctic Warming 1°F Per Decade
- American Millennials Are Some Of The World’s Least Skilled People, Study Finds
- Russia and North Korea forge ‘year of friendship’ pariah alliance
- March 2015
- February 2015
- December 2014
- November 2014
- September 2014
- December 2013
- November 2013
- October 2013
- August 2013
- March 2013
- February 2013
- January 2013
- December 2012
- September 2012
- August 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
Top Posts & Pages
- THE TRUTH BEHIND FRATERNITIES AND SORORITIES
- Nuclear Targets in America
- 68 New Earths and 288 New Super Earths: The New Kepler exoplanet data - NASA videos and pictures
- This Is Not A Mosquito It’s An Insect Spy Drone For Urban Areas Already In Production Funded By The Gov (VIDEO)
- Nibiru planet X 2012 PROOF of Government conspiracy
- Facebook Now Has 104,857,600 GB Of Your Personal Data Stored On Its Servers
- Dr. Michio Kaku on Japan's Nuclear Crisis: 'We're Very Close to the Point of No Return'
- Records fall as big spring storm hits Madison
- The Future of Food Riots
- Africa drought leaves 10 million facing famine and disease
- 1,263,908 hits