The gold market experienced a rally today in response to the news that the next round of Quantitative Easing is scheduled to proceed in April. The announcement, which had been eagerly anticipated, was disseminated through back channels, resulting in a general buoyancy across markets. Prior to this announcement, the former Chairman of the Fed, Ben Bernanke, had implicitly dismissed the possibility of a forthcoming round of Quantitative Easing during an appearance before the Congressional Finance Committee. Since he did not mention it, the markets interpreted this omission as a delay.
As a result, gold has been trading within the $1,600-$1,750 range. This correction has disheartened some investors who were not aware of the long-term nature of gold investment. Nevertheless, experienced traders have been anticipating lower gold prices for some time in order to make purchases.
In response to news of the next round of Quantitative Easing, the gold market gained $10 in intraday trading. However, it remains uncertain if these gains will continue beyond the end of the week. Although various forms of Easing have been implemented over the past two years, official Quantitative Easing directly injects liquidity into markets and weakens the value of the dollar. As a result, gold prices rise as investors seek a store of real value.
The current mini-correction presents an ideal opportunity for experienced investors to acquire gold, which is more affordable now than it has been for over three months. As the harmful effects of Quantitative Easing become apparent, market-savvy investors are accumulating gold. Today’s announcement and the subsequent market reaction can be seen as evidence of the market’s dependence on Quantitative Easing. One could speculate that the Fed’s revised position represents an acknowledgment of Wall Street’s demands.
The Fed and its subsidiaries announced a “sterilized” round of Quantitative Easing the following week, after all major markets suffered multi-digit losses. However, most investors were unclear about the implications of “Quantitative Easing” and “sterilized Quantitative Easing.” This program is designed to mitigate the negative consequences of rapid money printing by rebalancing bank reserves. Nevertheless, the market reaction to the news provides ample proof that easing in any form will lead to significant gains in all precious metals.
It appears that Quantitative Easing is forthcoming, and the gold market will be one of the direct beneficiaries due to its effect on the dollar.
Recommended for you: Gold IRA Rollover Guide and Silver Investments.
Categories:
Gold News
Get Your Free Gold IRA Investor Kit & 7 Blunder Report
Free Investor Kit 
View Charts
