QE programs fillip precious metals buying

Because of announced central bank money creation programs, at the retail level gold and silver buying is at a solid pace, not at a frenetic pace, which is good, as frenetic buying usually suggests a top. Based on what we’re seeing at CMI Gold & Silver, precious metals prices seem poised to go higher.

For those investors who try to pick bottoms and tops, I’m not say buy here. But, for long-term investors seeking hedges against further currency debasement, I’m saying buy here. Two, three years from now, people will be kicking themselves for not buying at these levels.

The most anticipated central bank announcement was the Fed’s QE 3, which more aptly should be called “QE Forever” because Bernanke said that monthly the Fed will inject $40 billion into the market by purchasing mortgage backed securities for an “undetermined time.” Given Bernanke’s faith in Keynesianism, it is likely that QE3 will go on for a long, long time.

The European Central Bank announced that through Open Market Transactions it will buy unlimited amounts of eurozone bonds, which means unlimited euro creation. This operation should be named Open Market Purchases because there will be no selling by the ECB, only purchases.

The Bank of Japan announced the equivalent of a $1 trillion money injection. This was long overdue according to Keynesian economists.

China’s central bank just revealed that in the last three days it has injected the equivalent of $53 billion into its banking system. Analysts of the Chinese markets have been predicting such, and a loose monetary policy by the People’s Bank of China is expected for some time to come.
Not to be forgotten is that the UK has had for sometime its own quantitative easing program.

Investors have to deal with not the possibility of but the actuality of currency debasement, higher prices, and negative real interest rates for who knows how long. Logically, we can expect higher precious metals prices.
Analysts at high-profile banks and brokerages houses actually put numbers on predicted gold price increases through the end of the year, like .7%.

There’s no way anyone can predict precisely just how high the price of gold and silver will move in this climate. The world is afloat in a sea of paper money. We can expect higher gold and silver prices just as we can expect higher prices for everything else.