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dom1971
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Only One Thing Matters For Gold Prices: There is No More QE

- Sam Kirtley - Sk Options Trading

1. In order to appear somewhat credible and scientific one does need to entertain the options once in a while. Otherwise you can appear fixated. It doesn't surprise me in the least that after trillions in QE over 4 years, the Fed has said this. They get to see the market's reaction and at the same time get some credibility.

2. Lets say for a minute that the Fed does what it says and *tapers* QE. Lets say they drop it down $5b per month starting now. That's still another $680 billion of QE - around the size of QE1 I think. Tapering QE is not stopping QE - it is reducing it over a period.

3. Again, lets say Sam is right, QE is "stopped" and the economy improves. Does gold keep dropping in value? Well we have about 2 trillion of QE that is mostly "waiting in the pipeline" so to say. Banks holding onto a lot of liquidity to remain "solvent" in the face of their assets that have been de-valued since 2007. When the Fed succeeds in inflating stocks and real estate once again the banks will be more solvent and thus keen to flood *ahem* lend all this liquidity into the marketplace. Sure a lot of this has been "priced in" to the value of gold already but when the average consumer sees some *real* price inflation across the board (not just in isolated sectors like energy and medical) then I think this may keep hard assets like gold in some favour.

4. "Only One Thing Matters For Gold Prices: There is No More QE".... riiiiight. So from 2001 with gold at $260 rose about 400% to over $1000 before any financial crisis and before a single dollar of QE was put on the table.

Look, I've lost quite a bit of faith in the metals myself, and have sold some physical too (with nice premiums due to demand, luckily). However I'm not buying into thin arguments like this one. "Get out of the X while it's low so you can but into Y when its high" - sounds like a recipe for disaster for me.

Commented 3969 days ago

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Beginning of the headline :One can make numerous arguments for the future direction of gold prices, citing a myriad of facts and statistics to justify one’s position, but the reality is there is only one factor that matters right now; the Fed is not delivering any more QE. This means gold prices will continue to head lower, a view we have held since the start of this year. All other arguments are overridden by the simple reality that Bernanke is currently in discussion as to a potential “tapering” of QE, so additional eas... Read More

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