Best of the Week
Most Popular
1.How U.S. Dollar Destruction Threatens the Global Economy - Steve Forbes
2.Why UK House Prices Will Continue Rising - 'It's Immigration Stupid' - Nadeem_Walayat
3. Bitcoin Price at Beginning of a Move up? - Mike_McAra
4.Gold Price to Plunge, Visiting Fort Knox - David_Hague
5.Silver Price Forecast - Metal to Gain Ground in August on These Factors - Jim Bach
6.Gold And Silver Will Rise With US Dollar Demise, Just Not Soon - Michael_Noonan
7.Bitcoin Price Strong Move Possible - Mike_McAra
8.Israel Gaza War Crimes - Soldier's Ordered to Shoot Civilians Including Children - C4News - C4News
9.UK House Prices Crash Warning - Daily Mail Cognitive Dissonance - Nadeem_Walayat
10.UK House Prices Boom - Top Quick Cheap Tips to Help Sell Your Home - Nadeem_Walayat
Last 5 days
Gold Rising Interest Rate Fallacy - 22nd Aug 14
Jackson Hole: Myth of the All Powerful Central Banker Continues - 22nd Aug 14
Partying On In The Terror State - Thank God for Nuclear Weapons - 22nd Aug 14
The Something for Nothing Society - Lifecycle of Bureaucracy - 22nd Aug 14
Hitting The ISIS Panic Button In The Middle East - 22nd Aug 14
US Stock Indices 10-Year Consolidation Patterns ... Upside Breakouts? - 22nd Aug 14
Gold and Silver Price Getting Set To Explode Higher - 22nd Aug 14
Deflation's Final Curtain Call - Part II - 22nd Aug 14 - Clif_Droke
Gold Big Picture: Most Important - 22nd Aug 14
How the “Uncertainty Factor” Drives Crude Oil Prices - 22nd Aug 14
Inflation, Interest Rates, and Why You Should Own Gold - 22nd Aug 14
U.S. Interest Rates Can Rise States Fed President - 22nd Aug 14
Why Emotional Discipline is Key to Trading Success - 21st Aug 14
Getting the Most Value from Your “Geriatric Cruiser” - 21st Aug 14
Mafia Boss Claims Stocks A Bubble, Buy Physical Gold and Silver - 21st Aug 14
Outrage! On The Beheading of Our Media Brother James Foley - 21st Aug 14
Stock Market Crash a Historical Pattern? - 21st Aug 14
The Black Box Economy - 21st Aug 14
The Bond Market is taking Advantage of Janet Yellen`s Dovishness - 21st Aug 14
Meet Your Investment Manager - 21st Aug 14
Gold and Silver Trading Alert as U.S. Dollar Soars to New Highs - 21st Aug 14
President Obama Strongest Statement Yet on Israel Gaza War - 20th Aug 14
Peak Gold? Russia To Surpass Australia As World No 2 Gold Producer - 20th Aug 14
AI, Robotics, and the Future of Jobs - 20th Aug 14
Stock Market Investors What's Your Exit? - 20th Aug 14
The Gold War - Thinker, Trader, Holder, Why? - 20th Aug 14
Ukraine Interest Rates Soars to 17.5% As External Debt Cannot be Repaid - 20th Aug 14
Rising Interest Rates and The End of Stimuland - 20th Aug 14
Inflation Watch: $245,000 to Raise a Child in United States - 20th Aug 14
Inside the Stunning Deal That Put Apple and IBM on the Same Side - 20th Aug 14
The US Gold in Fort Knox is Secure, Gone, or Irrelevant? - 19th Aug 14
Bitcoin Price On The Brink of a Possible Reversal - 19th Aug 14
Why Tesla Stock Price Will Double in the Next 12 Months - 19th Aug 14
Europe's Economic Malaise: The New Normal? - 19th Aug 14
The Coming U.S. Economic Collapse Will Trigger a Revolution - 19th Aug 14
Market Bubbles, Bubbles Everywhere - 19th Aug 14
This is Your Economic Recovery With and Without Drugs - 19th Aug 14
Stock Market Strong Start to Jackson Hole Week - 19th Aug 14
Iraq, Ukraine - Oh, What A Tangled Mess We Weave - 19th Aug 14
How to Apply Moving Averages as a Trading Tool - Video - 18th Aug 14
Why Short Stock Traders Are Losing Money This Week - 18th Aug 14
Stock Market Rally May be Complete - 18th Aug 14
Why Chinese Citizens Invest In Gold - 18th Aug 14
Palladium Reaches 13-Year High Over $900 oz as Gold Trading Volumes Surge 66% - 18th Aug 14
Understand and Profit from Surging European Volatility - 18th Aug 14
No Escape from The Dollar as The Currency Standard - 18th Aug 14
Stock Market New Highs Less Certain - 18th Aug 14
German Stock Market DAX About To Drop - 18th Aug 14
Stay on Board - Stock Market Big Picture - 18th Aug 14
Europe Economy Is Tanking, QE Is Coming - 18th Aug 14
Are You Ready for The Greatest Technology Revolution Yet? - 17th Aug 14
Why King Coal is Bigger than Oil or Gas - 17th Aug 14
U.S. Empire of Death and Lies - 17th Aug 14
Ukraine - Whose Spin Are We Caught Up In Here? - 17th Aug 14
Time Decay And No Escape For Abenomics - 17th Aug 14
India BSE SENSEX The Party Is Over In Bombay - 17th Aug 14
Stock Market Uptrend Looks Underway - 17th Aug 14
The Key Role Of Conspiracy Theory In Dumbing Down Society - 17th Aug 14
The Federal Reserve in Denial Mode - Bond Market Explained - 17th Aug 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Biggest lie in Stock Market History Revealed

The Direction of Silver Prices before QE Forever

Commodities / Financial Markets 2012 Sep 03, 2012 - 07:53 AM GMT

By: Dr_Jeff_Lewis

Commodities

The price of silver has moved up from $27.50 seen just a week ago to stage a test of the $31.00 level. Although technical traders may consider this market currently over bought, the fact remains that a bull market can stay over bought for quite a long time.

It will be interesting to look back on this rally that began in the wake of the Financial Times’ story about the CFTC’s lack of evidence and impending conclusion of its four year study into manipulation of the silver market.


As it stands, the big shorts remain active by virtue of the declining open interest.If this rally is sustainable, then the shorts seem to continue hoping they can cover at lower prices. Unless, of course, they are simply handling customer business that can readily stomach the paper losses.

What this implies for silver in the short term is anyone’s guess, as the world waits for the next coordinated monetary policy intervention that will largely determine silver’s longer term prospects.

Fed Hints at More QE to Come

Perhaps the most important driving factor for silver is that Fed policymakers are no longer talking about an exit strategy. They just talk about scope, room for more easing and new ideas for easing. Also, when will Japan intervene again?

One especially interesting indicator of monetary stimulus is the amount of Federal Reserve Credit outstanding. At the end of 1990, this amount was just $291 billion, but during the 91/92 recession, it rose to $342 billion over two years.

Another substantial credit expansion of $35 billion occurred in 1998, and again in 1999 as Y2K approached, leading to a record $108 billion rise for that year. The recessionary 2001/02 period then saw Fed Credit grows by $120 billion, leaving the total at $747 billion.

Nevertheless, the Federal Reserve then permitted a massive credit rise of $1.36 trillion in 2008 in response to the financial crisis, leaving Fed Credit at $2.247 trillion by the end of that year.

Perpetual QE on the Horizon?

The Fed now seems to be floating a trial balloon for the concept of perpetual quantitative easing. Remember how Operation Twist gradually evolved into ‘bond sterilization’?

Although there does not yet seem to be enough political will for more easing, if the new easing program can be made perpetual or recurring, it could provide a much-needed boost for the paper currency Ponzi scheme, while also lulling the masses by making QE seem normal and harmless. Another brilliant solution by the masters of perception!

In the Reuters article, "Fed mulls open season on bond buys to help economy”, the following passage clearly broaches the touchy subject of an open-ended QE program:

The Federal Reserve is considering a new approach to unconventional monetary policy that would give it more leeway to tailor the scale of its stimulus to changing economic winds.While fresh measures are not assured and the timing of any potential moves are still in question, some officials have said any new bond buying, or quantitative easing, could be open-ended, meaning it would not be bound by a fixed amount or time frame."I am inclined to think that if the Fed decides on more QE it would be of the open-ended variety," said Michael Feroli, chief U.S. economist at JPMorgan and a former Fed economist.

Contagious Money Printing Mentality Makes Inflation Virtually Inevitable

This worrying trend is not just seen in the United States. According to financial pundits, especially those located outside Europe, what the German court has to agree to so that the European Central Bank or ECB can start acting like a “real” central bank is really quite simple.

One New York based banking analyst summed it up like this: “Policy makers should empower the ECB to rescue banks,create a deposit insurance program and allow it to print money, like the Federal Reserve.”

All in all, this trend toward dilution of the value of paper currencies managed by central banks that permit an ongoing expansion of the money supply remains supportive of higher nominal prices for silver and other physical commodities as inflation appears virtually inevitable and endemic.

Furthermore, silver remains good value as one of the few hard assets still trading well below its inflation-adjusted highs. Even though silver’s price discovery mechanism remains dominated by a net and highly concentrated short position that commands almost half a year of global production, its future looks bright.

For more articles like this, and to stay updated on the most important economic, financial, political and market events related to silver and precious metals, visit www.silver-coin-investor.com

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

    Copyright © 2012 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014