Gold bulls often argue that the yellow metal will only go up as long as central banks continue to employ easy monetary policy however this thesis has been around so long that it might not even work anymore. That’s the gist of what Deutsche Bank suggests in their most recent outlook for precious metals prices. In a note to clients, they write:
So says Matthew Boesler (www.businessinsider.com) in edited excerpts from his original post*.
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) and www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
Boesler goes on to say, in part:
In a note to clients, Deutsche Bank writes:
Gold trading volumes have tumbled recently as investors supposedly wait for more clarity on central bank policy. This does not mean they are not optimistic. In the latest Bloomberg survey, bulls still outnumbered bears two-to-one, and QE by the ECB and the Fed is currently held up as the next catalyst for rising prices.
Evidence of falling inflation in the global economy, for instance the ebbing price pressures in China, is seen as positive for gold as it removes a barrier to easier monetary policy. [As such,] gold bulls must be mildly frustrated at policymakers’ reluctance to move so far.
A very few, however, dwell on the reasons for this caution, namely the fear QE might do more harm than good for the economy. Might it not do more harm than good for gold prices too?
For instance, due to the still diminished risk appetite, QE (in the way it has been conducted up to now) simply adds to the tightness in the safe-haven bond markets. Some money market investors are already facing negative yields and are being made poorer as a result of QE. [QE, or quantitative easing, is when a central bank buys bonds in an effort to lower interest rates.]
It is difficult to see how this could be good for gold prices.
*http://www.businessinsider.com/deutsche-bank-qe3-gold-prices-2012-8#ixzz23RaQaUBz (To access the above article please copy the URL and paste it into your browser.)
HAVE YOU SIGNED UP YET?
Go here to receive Your Daily Intelligence Report with links to the latest articles posted on munKNEE.com.
It’s FREE and includes an “easy unsubscribe feature” should you decide to do so at any time.
Join the crowd! 100,000 articles are read monthly at munKNEE.com.
Only the most informative articles are posted, in edited form, to give you a fast and easy read. Don’t miss out. Get all newly posted articles automatically delivered to your inbox. Sign up here.
All articles are also available on TWITTER and FACEBOOK
Editor’s Note: The above post may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
“The U.S., with $15 trillion in debt, and roughly $1.5 trillion in tax revenues, is an enormous disaster waiting to happen. At 10% interest rates the U.S. would use 100% of its tax revenues to finance the debt….This is why money printing is guaranteed…and this time, like it has before, it will lead to a financial crash [which] will be of a worldwide magnitude.”
…[A]t some point they [the central banks] will all start printing money. At some point they will recognize we are not going to have a deflationary collapse, that we are not going to have a deflationary debt liquidation…. If we get some serious stock market weakness, on top of the economic deterioration, then I think the central banks of the world, and in particular the Fed, are going to panic and do something big….They are going to print money and try to inflate the debts away….[As a result, there] is going to be this big, unridable phase of the bull market in gold that’s going to take place. That’s in front of us. It’s probably closer than most people think.
Why is it that the demand for gold moves inversely to interest rates – that the higher the rate of interest the lower the demand for gold, the lower the rate of interest the higher the demand for gold? [Let me explain why and what the future seems to hold.] Words: 1053
“Even with the prospect of no QE, if you believe the Fed, gold has not made a new low [since December] so, in my opinion, the absence of QE is priced into gold. On the other hand, if market conditions hit emergency levels, the central banks will be forced to their knees and they will be doing QE by whatever name it’s called. I think at that stage you are going to see gold go ballistic because it will be an admission of failure on the part of policymakers….If investors don’t do something now and take advantage of this funky period we are in, this daily grind of back and forth, they are going to be paralyzed. They will just be bystanders when gold finally takes off.”
Is this the time to acquire gold? Or is this the time to run away from it? Either answer could be correct, depending upon what course government chooses. Government is at a decision point, one that will determine how our economic malaise next turns. [Let’s review their choices.] Words: 922
In a note to clients, BofA rates strategists Priya Misra and Shyam Rajan say the Fed is “waiting for the triple threat” – three key triggers that must be met before the Fed does any additional easing. They are…