"The key driver was the statement and the subtle change in language that it was "prepared to provide additional accommodation if needed" a shift from the previous wording that it "will employ its tools as necessary'," said Credit Agricole analyst Robin Bhar.
"We interpret this as a conditional easing bias. It ushes the door for QE2 wider and the implication that this has for a weaker dollar and further unease of what governments will do to weaken their currencies to support flagging economic growth."
Should the Fed resort to a second round of quantitative easing, which involves large-scale purchases of Treasuries to keep interest rates low in exchange for a cash injection into the system, gold's appeal to investors grows as the opportunity cost of holding a non-yield bearing asset declines.
Also, fresh cash in the economy raises the risk of a pick-up in inflation, which erodes the returns from currency, equity and bonds holdings, yet benefits owners of gold, who see the value of their holdings rise in line with consumer prices.
Gold has risen by over 17 percent this year, as investors have sought a relatively safe asset in which to park their cash as major currencies, stocks and bonds have become increasingly volatile.
A lot of that rise has come in the last couple of months as gold has gone from $1,150 to near $1,300 this summer. Alarm bells should be going off in the back of everyone's heads over this. We're shifting from the housing depression's deflationary spiral to "bi-flation" now (high end goods deflating, basic commodity products like food and gas inflating) to anticipation of Helicopter Ben's Magic Printing Press being put on autopilot and blowing the whole thing out of the water.
Only a question of when.
No comments:
Post a Comment