While German Labor Minister insists that future bailouts in Eurozone countries be covered by gold reserves according to a Reuter’s report, an ideal collateral to nations helping Greek bailouts. August 26 will be that long awaited date, when helicopter Bernanke announces his policy response, which could also change the outlook on assets.
Most people doubt Bernanke will have much to say because he has exhausted his toolbox to fix things. But, should he dream up another QE to stimulate liquidity, the only creative idea remaining to aid the uniqueness of US recession, the end game will be another massive failure. The first QE to fix the budget in 2009 and the last QE2 in 2010 had lifted prices in stocks and commodities but had sunk the economy into a deeper hole, forcing consumers to cut back. Not to mention banks deliberate destructive foreclosures for millions of American homeowners.
That is why, the talk of another QE3 or not this Friday might be a major move in assets to come out of the Jackson Hole meeting with Fed Chairman Ben Bernanke. All markets from Europe to America are anxiously waiting to see should there be a QE3 or not. Common thought is that it will not be announced, but it will be left on the table. Investors will continue to hang on for dear life however; it will be an ideal time to pick up gold before something drastic changes that will raise the price of the yellow metal and moves it once again further north. On the stock side, the outcome of the meeting could lead to a possible crash in the stock market, which again will affect gold positively. One of the many uncertainties in question: could the printing take precedence, how the Fed will justify it since there are already speculations over the Fed’s independence to prop up stocks for political motives.
Its important for investors to note, that while the talks of a QE3 has lifted gold prices this past week, Goldman Sachs is saying that they are under the assumption the Fed will announce QE3 this week which will raise gold after a short correction. However, if Bernanke disappoints the market, commodities and stocks may further correct. As to the will he or won’t scenario in question circulates the US stage, the drama in Europe continues to unfold as well while awaiting the Feds results. The fear is, that whatever the decision, it will continue to hit the already deep in the gutter zone Europe further over the head. “The euro is breaking down and the process of its breaking down is creating very considerable difficulties in the European banking system,” Alan Greenspan said yesterday, according to Bloomberg. Speaking at the Innovation Nation Forum, he mentioned for Erupean leaders to reassess the feasibility of a monetary union of the 17 countries to save the Eurozone, which has become a great threat to US economy.
While awaiting Friday’s Fed decision, gold has corrected in the past hours for a quick buying opportunity. Make no mistake; gold is not in a bubble.
Whatever motives Americans and the European big wigs have in their heads, both economies are at an anemic state regardless of this morning trumpeting how the dollar and Euro is up and gold falling toward $1700. For those who believe that this may mark a return of confidence to American paper will suffer the greatest loss in lieu of stupidity.
The markets are thirsty for bailouts. Manipulations along with robbing Peter to pay Paul has short changed the global economy. While the global banking system is edging its way towards another epic collapse, it also means, in just a few short months, stocks will be back at 2009 lows, while gold prices again travel north of $2,500 an ounce. “Sophisticated investors understand the currency game, thereby are escaping from what is perceived to be a fiat money system–paper money that is deteriorating,” says Regal Asset Team of Analyst, “couple that– without economic growth, short-term interest rates touching rock bottom and fears of another recession with the possibility of a European banking-system meltdown, it all factors the very foundation that will spike gold after a brief correction.