As we make our way through the hot months of summer, the gold market is sizzling with news of instability in Europe and rumors of another round of quantitative easing by the U.S. Federal Reserve.
Just in the last two days, gold has shot up around $30 per ounce and broke a new record in fact.
Minutes from the Fed’s June policy meeting is credited with today’s late day surge in gold. Some members of the central bank indicated they may be open to further monetary stimulus.
Excerpts from the minutes said “a few members…” of the central bank’s Open Market Committee “might have to consider providing additional monetary stimulus, especially if economic growth remained too slow to meaningfully reduce the unemployment rate in the medium run.”
This is the first time the Fed has made any direct mention of a third round of what it dubs as ‘quantitative easing.’ The latest round ended in June but with lackluster employment numbers, the Fed may once again consider buying U.S. Treasuries (…in effect, printing money) to try and stimulate the economy.
Following the news, the U.S. dollar fell in value against the Japanese Yen and other currencies. Commodities traded in dollars rose in price, with oil gaining 2%. Silver also rose by 2% in late day trading.
While Tuesday’s price is a new all-time high, it’s nowhere near its inflation adjusted high of $2223 according to the Fed’s branch in Minneapolis. Back in 1980, the last big gold run, the yellow metal peaked at around $850 per ounce. In today’s dollars, that equals roughly $2200.
That’s why many of us believe gold has a long way to go. Considering the issues that led to the last bull-run in the ‘70s are much more entrenched, it’s quite possible gold will go well beyond its 1980 high.
Moves like this by the Fed, along with continuing economic troubles in Europe and the U.S, is why we think now is the time to own gold and silver. Having these metals in your portfolio will help preserve the value of your wealth from the ravages of monetary and price inflation.
To learn more, visit our gold investors’ knowledge center today or visit the main site for current prices on gold and silver coins.
Well I know that in the late 19th century (possibly the gretaest economic period in American History), we had the gold standard. The main reason why the gold standard is better than purely fiat paper currency is that it cannot be subject to the whims of whoever has monopoly power over the printing press. The government can’t use alchemy to inflate gold and devalue the savings of many Americans to finance wars, that’s why a period of war (such as the civil war) often involves a departure from the gold standard. The gold standard won’t quickly end the debt, but it will control inflation and heavily restrict government spending since the government will no longer be able to borrow money from the Fed’s printing press. Also consider banking, if we had a gold standard and a person’s deposit had to be backed up 100% by gold, there wouldn’t any worry about a run on the bank like what happened during the great depression. People would know that they could withdraw all of their money and whenever the bank loaned someone’s money, it would get that person’s permission, and the person would know that X number of dollar in their account was being loaned out and would not expect to be able to withdraw it. The problem is the in interest allied against this, namely the banks as well as people who want to get bank loans quickly to finance their projects. Fractional reserve banking can generate real short term wealth, but it is nonetheless fraudulent. Also, governments wouldn’t be able to print the money they need so they prefer to have a fiat system. They and the people who get the new money first would benefit because the market hasn’t yet caught on to the increased money supply, but by the time it trickles down to the average citizen, inflation would’ve sent in and the new money would do nothing to improve their buying power.