With "Operation Twist" winding down (June) it looks like QE3 could be a reality...gotta keep lipstick on the pig through the elections! I had thought bullion prices were headed lower, but if QE3 gets off the ground, current prices might look pretty good. http://www.cnbc.com/id/45977098
One thing to watch very closely is how much cash (record levels) the European banks are currently parking at the ECB. The same thing happened in the US around the Lehman period which froze up liquidity. Gold at that time took a steep dive (look at the charts for late 2008). If banks keep parking their money instead of lending to companies, individuals and each other, the ECB will crank up the printing presses. Since US banks are counter-parties to much of the European banks' trades, it wouldn't surprise me if the Fed cranks up theirs too. That's what this whole "dollar swap" that Bernanke did in November was about. He basically bailed out the European banks to save US banks. No reason to think he wouldn't do it again. The mindset at the Fed is that if the banks go, everything goes. They're not going to let that happen. Once it's clear that the printing presses are going into overdrive, gold will rally. Considering all this, I bought Barrick Gold last week. I bought stock instead of bullion for a couple of reasons. The miners are undervalued compared to physical bullion. If the Europeans won't put cash into their own economy, there's a good chance that cash will flow to US equities. Greece faces large debt payments in March, which could lead to default or finally being kicked out of the EU. This panic would cause more outflow of funds ... likely to the US. The US is rigging the numbers to make our economy look like it's improving. I think most people are buying it, and perception is reality. Another reason for the stock market to go up. So Barrick would get the boost of a rising gold price, and the added boost of rising equities. But I could be completely wrong.
At the risk of oversimplifying, the US dollar is presently one of the "taller midgets" in the world economy. The dollar, when strong compared to other major currencies, usually results in lower gold prices for us. For other countries whose currency has lost ground against the dollar, it costs them more to buy gold therefore causing a slump in demand and resulting in lower gold prices. Additionally as gold trends downward, there is less purchasing buy stronger countries (and individuals) and more selling to minimize losses creating a surplus. The law of supply and demand proves this. As gold and other PMs seem to have bottomed, purchasing returns. It's not that we have come out of the recession, it's just that our economy is not as bad when compared to some other countries. Look at existing home sales. The volume is up, but the values have remained nearly the same as 2010. Precious little has changed in our economy. It's other parts of the world that are continuing to backslide as a result of their recession/depression.
Please hold off until June!!! I'm begging of them to hold off until June!!! btw...thanks Yak...never fail to make my day...keep up the good work
Why oh why don't I understand economics? I must have a the economics allele in the turned off mode in me. I do appreciate though when members of cointalk reinterpret things like this in plain English and make it easier to understand. Keep it coming, Yakpoo!
It won't, but I hope it goes below 1.20 by May, I'm betting on it. Look for it to recover a partial cent each time they do something "positive" to assure buyers, but it will come back down, and the USD$ might hit 84. which might really affect gold/silver. But have you looked at Copper? up 10% over last month 3.26 --> 3.62. Jim
James Rickards recently did an interview where he anticipated that Greece exiting the Euro would not cause it to fail, but if the rest of the PIIGS follow suit that could be the trigger. One scenario is that the Euro could become stronger with the weaker nations' economies no longer participating, but I find Merkel's recent comments about passing a law making it illegal for institutions to sell bonds after they drop in price rather ominous. QE is in full effect in the Eurozone, and a lot of that money is coming from the US Fed. Between that and the increase in money supply that we can see, QE3 may already be in effect. Jim Willie has said he thinks Operation Twist is QE3. Thus one could dub what most people will end up referring to as QE3 as QE4. Nonetheless, whether it's called QE3 or QE4 I agree with the OP that that will be the catalyst for higher metals prices, but I don't think it will happen with the markets as high as they are today.
