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Gold Bullion Very Affordable

April 5, 2012 - Gold bullion, due to the recent release from the Federal Open Markets Committee, is the most affordable it has been in a while. It’s always possible that a further correction to the downside will occur in the gold market, as in every other market. But since the correction in the gold market began almost six weeks ago, we are witnessing an environment in which the price of gold bullion is very much undervalued due to inflation in other assets in the market.

After Federal Reserve Chairman Ben Bernanke did and then didn’t allude to or indicate a round of Quantitative Easing in public appearances and Congressional testimony, markets have been gyrating one way and then another while uppity Wall Street types trade exclusively on the news. While the news is very important to the sentiment currently affecting world markets, we seem to have gone beyond a point when the actual market fundamentals are no longer relevant compared to impending news.

Consider that Ben Bernanke never actually said the Fed would not or would begin a round of Quantitative Easing. His words were taken, instead, as a newsworthy implication of a delay in Quantitative Easing or subtle indication of a Quantitative Easing. It is an opinion that the policy of the Federal Reserve should be clear, supported by strong and intelligible data, and the forecasts should be accurate.

However, in this case it seems the lesson is also one the markets need to learn. While sentiment is truly of the utmost importance, markets don’t inherently function on news alone. Perhaps they will in the future if we created enough derivatives and other paper debt instruments, but for now there is some underlying reality that the market is supposed to reflect.

During all this process, gold bullion is the only rational and intelligible asset to own. It is relatively immune to the mad money printing of the central bank and the monetary easing policies because it is a real tangible asset and can’t be printed into existence. This accounts both for gold’s popularity and its dramatic price increase in these past years. We know that price will continue to appreciate in reality despite any momentary corrections or adjustments because the Fed will continue to print money. It is a paper market in which gold bullion will be the ultimate winner.

Daily Updates Archive

Jonathan Monroe

Senior Staff Writer -

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