In what’s seemingly the endless summer, the gold markets seem to be in a holding pattern as precious metal, bond and stock traders await the latest figures on the U.S. economy…and what actions Fed chairman Ben Bernanke will take.
This Friday will see a revised GDP figure for the 2nd quarter of 2010. Many are not expecting great news considering job losses increased in July as the government began laying-off temporary census workers. Additionally, private business hiring was lackluster at best, only adding 71,000 jobs in July. According to government figures, there was a net loss of 131,000 jobs in the month of July.
With fears of a double-dip recession signified by falling oil prices, stocks and other indicators, gold prices are remaining steady around $1230 per ounce…combine that with relative strength (for the moment) of the U.S. dollar against other major currencies and you’ve essentially got a situation where gold is going to remain pretty flat, for the time being.
In light of falling factory orders, oil and commodity prices, Federal Reserve chairman Ben Bernanke is expected to announce an expanded program of “quantitative easing” to help the economic recovery maintain its momentum.
Various Fed governors were said to have had pretty heated discussions on how the Fed should proceed in this environment. In the end, Chairman Bernanke gained the board’s approval on how he should manage the Fed’s $2.05 trillion in mortgage debt and U.S. Treasuries…Bernanke essentially prevailed in getting the board to allow him to reinvest maturing securities into more U.S. bonds.
We’re expected to learn more about Chairman Bernanke’s plans when he speaks at a symposium in Jackson Hole, Wyoming this weekend.
What does all of this mean for buying gold and silver?
It’s hard to say at the moment and a lot depends on what the Federal Reserve decides in response to the economy. We’re still in a very fragile state economically and with these latest indications of job loss, falling home prices and factory orders.
Add to this the sharp decline in home sales after expiration of the government’s tax credit and you’ve got a pretty dicey situation.
If Bernanke feels the economy is heading into another recession, he may expand his program of “quantitative easing” that he used the last go around. In the last recession (’08-’09), the gold price bottomed around $720 per oz in November, 2008 off a high of nearly $1000 per oz in March of that year.
But since our last update in mid-July, gold saw a slight retreat to around $1160/oz in late July to pull back and stay around $1230.
But if many people’s predictions are correct and Bernanke tries the “quantitative easing” approach to prevent a recession, gold prices will soar even more than they have since their Nov. 2008 bottom.
While we can’t predict the future to a t, we can safely assume that if there is further weakening in the dollar, gold prices will continue to climb, in turn, helping you preserve what wealth you now have.
Consider buying gold and silver as a way to preserve your money’s purchasing power and the value of your wealth in times like these.
Lets say we went back to a gold standard. Now there is no way we could get near it, but hypothetically if we owned all the gold in the world, I don’t see how 2.2 billion oz cant be deflated if the dollar became the new world backed currency. Since you admit it goes through cycles, how does a nation find more stability in gold, when it is based off the same idea as the dollar, trust?
Yea we can trust the govt economic figures. Do they have creative arts dept?