The Fed has made buying gold the best possible investment in the coming two years.
Posted by Adam King on February 06, 2012
Buying Gold to Beat the Fed
February 6, 2012 – It can be pretty difficult to come up with something good to say about the Federal Reserve or its policies lately, but after this week owners and investors of precious metals may find a kind word or two for Ben Bernanke after the Fed has made buying gold the best possible investment in the coming two years.
During the Greenspan years, and after 9-11, a policy was instituted to avoid a very serious financial depression in 2000-2002. The Federal Reserve lowered interest rates to multi-decade lows in the early days of the war on terror and there they remained as the US fought in at least two serious military incursions overseas. That all would have been well and good, especially if the Iraqi oil had paid for the wars as lying politicians claimed, but in the wake of the dot com bubble, the recession of 2000, and the overinflated housing bubble, a low-interest rate policy left the Fed no where to run if things went south.
About this time, coincidentally, gold began its decade-long rise as the asset of assets. It has been a 600 percent decade for gold and, as we shall see, there’s still a lot of room left to climb. As gold rose higher and higher, for all intents and purposes under the radar, the serious problems in the United States’ economy began to burst at the seams. The housing bubble crashed in 2007, after a nominal high in the Dow in July of 2007 the stock market began a decline, and in 2008 we experienced a credit crisis that forced government subsidies to private businesses in order to avoid widespread bankruptcies.
Now, the Fed can’t raise interest rates even if it wanted to, but as recent developments have displayed the Fed has no interest in raising interest rates at all. Previously, the Fed had openly announced that interest rates on lending would remain low into mid-2013, spurring many major banks to make very strong forecasts for gold through 2012 and advising their clientele that buying gold is a good move, given the monetary policy. Now, however, the forecasts are being extended and the price range of what gold is expected to cost in open market is being increased rapidly.
The effect of a low interest rate policy on the price of gold has been the same for a decade and will be the most reliable driver of the price of precious metals in the coming months. Buying gold has been and will be the best way to manage wealth based on the actions of the Federal Reserve.
Stewart Lawson
Senior Staff Writer – Certified Gold Exchange
Categories:
US Gold Market
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