Bernanke gave gold and silver one more chance
At a meeting of Federal Open Market Committee (FOMC) January 25 the U.S. Federal Reserve Chairman Ben Bernanke said the Fed will continue the policy of “exceptionally low” interest rates before the end of 2014, which became necessary because of steadily high unemployment rate and the stability of the current statistical reconstruction.
Bernanke also reiterated that for the first time in the history of the Fed, which already has 99 years, they intend to pursue an inflation targeting at least 2%. Other central banks around the world have long been pursuing a policy of inflation targeting, and the Fed is going to do it for the first time just now. True, this year the goal will not be reached: inflation, the Fed is estimated, will not exceed 1.8%.
Not surprisingly, the market reacted with euphoria on Ben Bernanke’s speech. The Dow rose 0.64% to reach 12746.96. Asian and European stock exchanges also opened a “green zone”. Commodities such as copper and crude oil, also rose in price, not to mention precious metals, which are always very sensitive to the Fed zayavlyanim on the policy of quantitative stimulus (QE) – precious metals have shown incredible growth in January 26.
The price of gold easily overcomes the resistance point at $ 1680 an ounce and now confidently trading above $ 1,700 an ounce. Silver could also be easily overcome yesterday in the $ 33 mark per ounce, as this note from a technical point of view, is very important because of the silver could not be done in the autumn of last year. If silver can overcome the $ 35 per ounce, and we see signs that hedge funds will begin to understand that the U.S. Federal Reserve and European Central Bank (ECB) is need to constantly resort to printing money to a greater or lesser extent, as if they themselves descriptively not known, then the silver will have a chance to start moving to such heights that it did not reach in 2010-2011.
The other side of the current process is another weakening U.S. dollar. After the crisis began in late 2008, lust for risk appetite is always accompanied by a fall in the Dollar Index (Dollar Index), and yesterday was no exception – the index fell below 80 points. It seems that we are at the beginning of the next period, when financial markets are forgetting that the world is experiencing a crisis, and capital rushes back to anything, but not in the dollar and government bonds or in the United States.
Dollar Index continues to fall a record 72 points, which would mean a further rise in prices for gold and silver. In this case, you should expect a yield increase of silver above the inflation expectations in the U.S.. This would mean a formal declaration of the third stage of the quantitative stimulation (QE3) of the Federal Reserve. Cheaper dollar and rising prices in the United States will eliminate the need for short-term Fed to resort to more drastic measures.
This iterative process continues until the next bear trend, during which again will fall stock markets, commodities and the dollar will rise again, and then the U.S. Federal Reserve will again be forced to take steps to weaken against other currencies to get the economy U.S. export advantages. Cyclic processes of this kind can be observed even a single time. Central banks may devalue their currencies, but they can not devalue the precious metals.
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