Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
Gold & Silver Prices in

Gold Investors Need Unsterilized Milk

IMG Auteur
Published : December 12th, 2012
895 words - Reading time : 2 - 3 minutes
( 0 vote, 0/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...

 

 

 

 

1. The FOMC meeting this week could be the fundamental catalyst that drives gold above $1800, and turns it into a “here to stay” floor.


2. Currently, about half of the bonds bought by the Fed are financed by other bonds it holds.


3. That process is referred to as “sterilized QE”, but the Fed is quickly running out of short term bonds.


4. Ben Bernanke also appears to be well aware that the real unemployment rate is quite a bit higher than 7.7%.


5. As a result, the door is open for him to announce “unsterilized QE”. He could do it on Wednesday, December 12. I would expect it to be called “expanded QE3”. If he’s feeling particularly aggressive, he may give it the label of “QE4”.


6. Regardless of the name he uses, compared to the existing QE3 program, unsterilized QE should be substantially more bullish for gold.


7. Please click here now. You are looking at the daily gold chart. A lot of institutional money managers are willing to buy gold aggressively, if it can trade above $1800, but they are sitting on the sidelines until they see what the Fed does.


8. Note the minor HSR (horizontal support & resistance) near $1730 and $1757. There is also a downtrend line that technicians are watching. I’ve highlighted that in red.


9. A resolution of the fiscal cliff issue could help power gold through that minor HSR, and through the much stronger HSR that sits at $1800. Many influential economists believe that the US government will reduce the total amount of Treasury bonds it issues, to avoid going over the cliff.


10. If that happens, and the Fed engages in unsterilized bond purchases to the tune of about $80 billion a month, it would result in a significant increase in both the Fed’s balance sheet, and the percentage of US Treasury debt held by the Fed.


11. The bottom line is that the Fed could end up buying and holding a gargantuan amount of US Treasury bonds. It’s unknown just how inflationary this would be, but many money managers would probably buy gold, just to hedge against that risk.


12. If Chairman Bernanke decided to play “hawk”, he could theoretically delay the implementation of QE4 until the next FOMC meeting on Jan 29-30, 2013.


13. I don’t think there will be a delay. I think he’ll make the move this week, and I’m a little worried that many investors in the gold community may have thrown in the towel on their gold stocks, just a bit too soon.


14. Patience is one of the greatest wealth-building tools that an investor can use, and the current time period is probably one of the most important times to employ it.


15. I want you to clearly understand the link between the rate of expansion of the Fed’s balance sheet, and the movement in the price of gold, especially since August, 2011.


16. On that note, please click here now. You are looking at the chart of US Treasury debt held by the Fed, courtesy of Business Insider news.


17. Now, please click here now. That’s the weekly spot gold price chart, and you can see that all upwards momentum was lost after August, 2011. Gold has drifted sideways since then, and so has the percentage of Treasury debt held by the Fed.


18. UBS economist Drew Matus says, "QE4 will result in a doubling of the expansion rate of the Fed’s balance sheet."


19. I agree with Mr. Matus, and I’ll add that such a change in the expansion rate could begin as early as tomorrow!


20. Please click here now. That’s the weekly chart for GDX. You are all aware that gold stocks have really gone nowhere since 2009. If gold is driven over $1800 by unsterilized QE4, it’s likely that powerful institutional money managers will embrace gold stocks in a much bigger way than they have in the past.


21. Note the 14,3,3 Stochastics series at the bottom of this chart. It is positioned at a point where enormous gold stock rallies tend to occur. Is this important oscillator anticipating the unveiling of QE4? I think it is!


22. Pension funds, family offices, and other large institutions started to buy gold stocks in 2011, as gold rose towards $1900, but the euro crisis and “Operation Twist” (sterilized QE) gave them cold feet.


23. Unsterilized QE4, and a gold price over $1800, could cause these huge movers of liquidity to believe that $1800, rather than $1500, is the new “here to stay floor” for gold.


24. A flurry of hedge fund buying and short covering could also occur, as these aggressive traders may try to pre-empt the flow of pension & institutional money into gold stocks. My suggestion is to put “Doctor Patience” in your gold stocks corner, for just a little while longer. Milk might be safer to drink when it is sterilized, but when it comes to gold stocks, I strongly suggest that chief physician Dr. Ben Bernanke’s unsterilized “QE4” variety, is what could send them soaring!


Special Offer For Website Readers: Please send me a email to freereports4@gracelandupdates.com and I’ll send you my free “Yellowcakes With Golden Syrup!” report. Learn which 5 key junior uranium stocks should be held in a portfolio with 5 key junior gold stocks!


Thanks!


Cheers



St



 

 

Companies Mentionned : Catalyst |
<< Previous article
Rate :Average :0 (0 vote)
>> Next article
Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am-9am. The newsletter is attractively priced and the format is a unique numbered point form, giving clarity of each point and saving valuable reading time.
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
A Salvo in the Battle for the Go...
27 Febovertheedge
I would argue that the devil is in the details, i.e. the definition of money. What the people of the US are using is currency. Currency bei...
A Salvo in the Battle for the Go...
26 FebFrankinca1
Sort of written for a PHD in economics, which gold believers (myself) are not often that well educated, have difficulty following. The definition o...
A Salvo in the Battle for the Go...
26 Feb07788525833
The dollar has a monopoly over all other types of money which is rammed down peoples throats by gun and drones , any one wanting to change this...
In Search of the Magic Wand: Car...
25 FebDoom
Yes, stay away from University of Phoenix, a school with a 9% graduation rate, that only gets students because it spends $200,000 a day on Google a...
Emails From Kiev: Free Speech Va...
25 Febovertheedge
"The problem is, the asshats associated with Poroshenko are even worse than he is." I'm assuming you mean the predators in the US White Ho...
The Bull Case For Gold This Year...
25 Febdepourcq
You talked about all the wrong reasons that gold will rise or fall, their is only one that everyone should know. The US has a debt of 18.134 trilli...
The Bull Case For Gold This Year...
25 Febneville
The fact that you are very lowly rated might be one of two things .1.You have been playing this card to often (Bear Joker) 2,The other is that you ...
Interventionism Kills: Post-Coup...
24 Febjox
A nice summary of what actually happened. It's sad that few europeans and even fewer americans are going to read it. My opinion is that US...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Mining Company News
Tinka Resources(Ag)TK.V
Announces AGM Results
CA$ 0.27-12.90%Trend Power :
Corporate news
Silver Standard(Ag-Au-Cu)SSO.TO
Early Glance: Silver companies
CA$ 6.57-0.90%Trend Power :
Corporate news
Pan American Silver(Ag-Au-Cu)PAAS
Early Glance: Silver companies
US$ 9.68+1.04%Trend Power :
Corporate news
Gold Fields(Cu-Ni-Mo)GFI
Early Glance: Gold companies
US$ 4.65+0.87%Trend Power :
Corporate news
Randgold Res.(Au)GOLD
- Total Voting Rights
US$ 79.19+0.24%Trend Power :
Corporate news
Continental Precious Min.(Ag-Au-Co)CZQ.TO
Engages Golder Associates for the Next Step in the Development of the Viken Project
CA$ 0.56-6.67%Trend Power :
Corporate news
Beaufield Res.(Ag-Au-Ni)BFD.V
Reports Annual General Meeting Results
CA$ 0.04-11.11%Trend Power :
Corporate news
Probe Mines(Ag-Au-Cu)PRB.V
Leading Independent Advisory Firms ISS and Glass Lewis Recommend Shareholders of Probe Mines
CA$ 4.94+0.82%Trend Power :
Corporate news
Newmont(Cu-Le-Ni)NEM
Why the Earnings Streak Will Continue for Newmont Mining (NEM) - Tale of the Tape
US$ 26.33+0.08%Trend Power :
Corporate news
Newmont(Cu-Le-Ni)NEM
Increased Earnings Estimates Seen for Newmont Mining (NEM): Can It Move Higher? - Tale of the Tape
US$ 26.33+0.08%Trend Power :
Corporate news
Comments closed
Subscribe to 24hGold’s daily market briefing
  • Prices and data of precious metals in 119 currencies and world mining companies
  • Daily analysis of the economy, markets and more
  • Free, daily and indispensable
Stay informed, subscribe now !
* Your email will never be shared.