Patrick MontesDeOca: The Fed recently decided not to taper their bond-buying program, even as interest rates rise, housing slows and the world economy remains sluggish.
All are signs that gold and silver are good buys.
TAPERING: NO END IN SIGHT
Eric Sprott, chairman, CEO and portfolio manager of Sprott Asset Management believes that the recent rise in interest rates explains the Fed’s decision not to taper their bond-buying program.
Rates on the 10-year note have climbed from about 1.4% to 3%. Rising interest rates have slowed the housing market by increasing the cost of carrying a house by 50% over a year ago. On top of that, the price of houses has risen about 10%. With rates rising, it dampens refinancing, so owners can’t take money out of their home and spend. Already refinance rates have fallen 70%. Tapering the bond program would only trigger a further rise in rates, further harming the housing market and, thereby, the economy.
GLOBAL CENTRAL BANKS
It is difficult for the U.S. Fed to taper alone, since other central banks around the world apparently have been working together to buy bonds and keep interest rates low. Unfortunately for the global economy, bond rates are rising even while central banks buying more bonds than ever before.
Additionally, the housing market and auto market, which are both heavily dependent on low interest rates, are slowing. Combined with weak job numbers, falling consumer confidence and slowing retail sales, as well as inflation higher than reported by the CPI, spending is falling and the global and U.S. economies are still sluggish, at best.
With talk of raising the debt ceiling, which the government will have to do, this was not the time for the Fed to taper, if there ever will be a time. After the Fed announcement, rates fell quickly, but they are already rising again. What does the Fed do if interest rates continue to rise?
Are we going to have QE to infinity?
GOLD AND SILVER: POISED FOR A RISE
The key to gold and silver prices is the unrelenting increase in physical demand caused by the recent sell-off, mammoth buying by the Chinese, and a shortage of gold— based on the difference between production and purchasing. If India were allowed to import how much they wanted, this physical shortage would manifest itself so quickly because China already imported 100 tons in July. The Indians would certainly have bought 100 tons. We only produce 185 tons per month. So those two countries would consume 100% of the mined supply and someone is selling it. Apparently Western central banks have been surreptitiously selling gold. Sprott argues that the demand could be twice the market supply.
The demand for gold shows no sign of slacking, as prices remain low, there is no tapering, and no sign of economic strength in the United States, Europe or Asia. Theoretically, Sprott argued, we should be around $1,600 an ounce for gold. “I firmly believe within a year, we’re going to hit new highs in both gold and silver.”
END OF U.S. DOLLAR DOMINANCE?
The end of dominance of the U.S. dollar may be in sight. With the U.S. dollar technically breaking down and China announcing on September 6 that they will trade oil in Chinese yuan rather than U.S. dollars, demand for the dollar should weaken.(...)Click here to continue reading the original ETFDailyNews.com article: Gold and Silver: The Bullish Case For New All-Time HighsYou are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)
Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes.
Markets are closed on certain holidays. Stock Market Holiday List
By accessing this page, you agree to the following
Press Release Service provided by PRConnect.
Stock quotes supplied by Telekurs USA
Postage Rates Bots go here