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Gold Bullion A Buy as Fed Backtracks

March 8, 2012 - Gold bullion has been a better buy this past week than at any other time in the past three months. Last Wednesday, Ben Bernanke appeared before Congress and neglected to mention a definitive third round of fiscal stimulus. There have been two official rounds of Quantitative Easing under the current Federal Reserve Chairman and both have provided the needed short-term boost to keep the economy afloat.

They have also flooded the market with liquidity that has eventually made its way to the purchasing power of the US dollar. Unfortunately, you cannot print such vast amounts of dollars without fundamentally affecting the value of all dollars. This inherent price dynamic has yielded a decade-long bull run in the gold market and made gold bullion the hottest commodity of the past four years.

Perhaps through day-trading you could have realized the kind of gains that were made in the gold bull market, and those forms of trading carry a significant risk, but otherwise no other investment or asset has produced the same triple digit return that gold has. Today, the Federal Reserve announced it will consider a third “sterilized” round of fiscal stimulus, and the price of gold spiked over $10 per ounce on that news alone.

This is direct confirmation that the Federal Reserve can, must, and will continue to print money in fiscal stimulus programs in the near future. As a direct result, the price of gold will continue its decade-long gain, perhaps even accelerating the gains it has made since 2008, when the Federal stimulus programs began in earnest. It is no exaggeration that gold is up over 600 percent in those ten years. Even with a serious correction at year’s end, gold realized an 11 percent gain last year and over 24 percent in 2010.

There is a direct relationship between the amount of dollars printed by the Federal Reserve and the price of gold. This is one of the market fundamentals that has led to the current gains in the market. Now, with more Quantitative Easing from the Federal Reserve in the near future of the markets, gold bullion is the best buy available to investors who wish to realize the maximum return and gain on short and mid-term investments.

Daily Updates Archive

Jonathan Monroe

Senior Staff Writer -

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