September 13, 2012
After holding steady at above $1,700 this past week, gold’s price per ounce has surged close to $40 in response to the announcement of QE3, which allows the Federal Reserve to buy up “$85 billion in new assets, including $40 billion mortgage-backed securities every month until the end of the year.”
As the Federal Open Market Committee announced an “open-ended,” or “unlimited QE,” it gave the fed the power too decide when enough is enough once the Committee asserts the economy is back on track: “To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens.”
As Reuters notes, gold has already made a 2 per cent gain this month in addition to the 5 per cent leap it saw in August.
As predicted, the Fed’s decision to buy up large-scale bonds has led to further deflation of the already sinking US dollar, urging both silver and gold prices to rise, with the latter rallying near $1,800.
Ed Meir, formerly of MF Global and now of INTL FCStone, told Reuters the Fed’s decision should be seen as unsettling: “Although previous rounds of QE have helped kick-start some growth in the U.S., the fact that we are once again at the ‘money trough’ is not very reassuring.”
Congressman Ron Paul released a statement earlier today addressing the Fed’s decision:
“No one is surprised by the Fed’s action today to inject even more money into the economy through additional asset purchases. The Fed’s only solution for every problem is to print more money and provide more liquidity. Mr. Bernanke and Fed governors appear not to understand that our current economic malaise resulted directly because of the excessive credit the Fed already pumped into the system.
“For all of its vaunted policy tools, the Fed now finds itself repeating the same basic action over and over in an attempt to prime the economy with more debt and credit. But this latest decision to provide more quantitative easing will only prolong our economic stagnation, corrupt market signals, and encourage even more misallocation and malinvestment of resources. Rather than stimulating a real recovery by focusing on a strong dollar and market interest rates, the Fed’s announcement today shows a disastrous detachment from reality on the part of our central bank. Any further quantitative easing from the Fed, in whatever form, will only make our next economic crash that much more serious.”