As expected, Federal Reserve Chairman Ben Bernanke faced challenges in controlling the credit offered through the Quantitative Easing programs and the market reaction has created a favorable opportunity for investing in gold. Last week, Bernanke appeared before the Congressional Finance Committee and did not provide a clear reference to a potential third round of Quantitative Easing, which resulted in a market downturn. This has led to a decrease in the Dow and other commodities, with the exception of oil.
Quantitative Easing serves as a temporary solution for market participants, providing short-term liquidity for potential profits. However, the drawbacks and risks associated with this stimulus, such as the devaluation of the US dollar, are becoming increasingly apparent. With every dollar created through the Federal Reserve’s Quantitative Easing programs, the value of existing dollars decreases, leading to inflationary pressures.
Despite the recent decline in the price of gold, it remains a valuable investment due to its immunity to inflation. As the Federal Reserve continues to inject dollars into the market, gold’s value and purchasing power increase, making it a sound long-term investment. The current dip in the gold market is a temporary reaction to the Federal Reserve’s announcement and should not deter investors.
In order to protect against the Federal Reserve’s monetary policy, investing in gold is the only viable option. With the possibility of a sterilized round of Quantitative Easing being considered, it is clear that the Federal Reserve cannot retreat from its fiscal stimulus without causing harm to the economy. The continued injection of dollars into the market will ultimately benefit gold, making it a wise investment for the future. Now is the time to consider investing in gold for potential future gains.
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