Gold price up or down the closer we get to election?

I don't see any real difference between the candidates' economic policies. That said, it isn't clear to me that high inflation is a slam-dunk sure thing. The debt is rising faster than the money supply, and high levels of debt are normally associated with deflation and not inflation. I know that it is always possible to hyperinflate if desired, but that's a policy decision that hasn't been made yet.

 

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People are so blinded by partisanship they purposefully ignore facts. The stock market has risen incredibly under the current president. The GOP's budget will simply add to the deficit as well.

 

Maybe I should have said will "continue to rise", spike, rally or whatever you want to call an irrational rise in the stock market . I think a lot of people are on the stock market sidelines because of uncertainty about what effect continued regulations will have. I think Romney is likely to reduced regulations on business not increase them. But the question was about PMs not the stock market so I was generalizing.

You chose to ignore my full statement because I said: But long term I am bullish on PM's because I don't see an end to the money printing. So obviously I think the GOP will continue to increase the debt and continue deficit spending. The government will have to print money to pay it off so I think that will increase PM value overall.

 

the pronouncement today that job growth has slowed, has increased speculation that that will mean QE3.

 

This is just a total guess. But I think it may go down with the hopes of the economy improving with a new president possibly.

But isn't QE3 supposed to be happening soon? And doesn't quantitative easing raise prices of PM's?

 

Folks there is a fine line in this subject area. Yes, politics influences commodities, stock markets, and currency flow, but when statements are specific as to one party or candidate, rather than general, they will be removed. There is a separate forum for political debates and discussions.
Thanks,

Jim

 

Bernanke recently said that they are ready to do QE3 if the economy needs it. It's open ended. Operation Twist isn't over until June so I don't see it happening before then, and my guess is that they will allow markets to correct enough for people to be begging for QE3 before it actually happens. However, it must happen at some point unless they are willing to default on the exponential debt growth, since leadership has been unwilling or unable to curb spending even with a 10 year timeline. The best they could do was go less deep into the red, but it always remains a possibility that fiscal responsibility will rear its head and the debt will be paid off. The difficulty with compounding interest is the longer you wait, the more debt piled upon debt you have to pay and the more difficult it is to get your head above water. My guess is that the economy will hang in there until after the election, because QE3 before then doesn't look good, but nobody outside the circle knows for sure. QE3 will raise prices of all assets and equities because that's what money printing does, and this one will need to be big to be effective.

 

Look at how many of the previous months of the last year they've upgraded the jobs numbers after the initial release - nearly all of them lately. Definitely more tepid than it should be, but one month of lower job increases is not a trend.

Additionally, the reported numbers were in-line with Fed expectations, so QE3 isn't a done deal.

 

Or let interest rates rise. That would be the free market solution.

 

There is little doubt that US will put up good gdp number for this quarter and likely even in Q2. But slowdown in Europe is going to hurt us in Q3.

 

Very true, but they would need to rise to levels that only a booming economy could sustain IMO. As long as wealth is being siphoned out of the system by those who do not provide benefit to the real economy that will be very difficult to achieve. The only viable solution that I can see is to cut spending significantly, but the vast amount of people who rely on government handouts will likely help ensure that a candidate willing to do that will never get elected. They've already shown they are taking the road of money printing, and we know where that leads.

 

There is no economic reason why the economy or any company could not withstand higher interest rates. Maybe there are other motives for not rasing rates, but economics doesn't seem to be one of them.

 

It won't happen because it would absolutely destroy a certain gubment owned car company which has stuffed it's dealers with close to a million unsold vehicles and continues to do so at the rate of 100K cars/month. The dealers can only sustain this vast inventory with free financing. it won't happen because it cause housing prices to absolutely collapse and this would take down certain TBTF banks. It absolutely won't happen because in the QE 1 & 2 process, the Fed moved huge amounts of toxic debt, which it considers a monetary asset directly on to its balance sheet into the asset column of the Monetary Base. High interest rates would kill these assets and The Bernank would be forced in front of Congress to explain why the Fed is now insolvent.

 

I don't think that is the reason, but I also don't understand what is motivating the zero interest rate policy. It certainly can't last forever, so the only question is when and how rates will rise. I think the widely held economic opinion that lower rates are always better rates is based on bad economic theory, and therefore unsustainable.

 

Social unrest trumps economic theory?

 

Up.

 

Elaborate on your point

 

I agree, higher interest rates mean better returns and people are more likely to reinvest in new innovations. As to what is motivating ZIRP, I will just say that if I were in charge of winning a class war without tipping off the opposition I can't think of a more effective method than monetary devaluation of which ZIRP is a notable contributor.

 

So, higher interest rates don't necessarily have to equal higher inflation. What affect do you think better returns on bonds and savings accounts will have on the price of PMs?

I agree the current interest rate environment is very abusive to those who have saved their whole life. It does, however, allow the politicians to balloon the debt without having to pay for it today.

 

If interest rates are increased to say 8% - 10% or more, the price of gold & silver would start to drop and I predict the drop would be rather substantial. This of course will never happen now because the Western finance industry would be completely unwound to nothing more than a utility for society.