Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Bernanke and Gold

Commodities / Gold and Silver 2012 Dec 19, 2012 - 02:20 AM GMT

By: Ned_W_Schmidt

Commodities

To date seems only one group truly loves the monetary policy of the Federal Reserve. Largely, that group is comprised of bankers and bond dealers that profit from selling bonds to the Federal Reserve. Bernanke and the bond dealers have become BFF, Best Friends Forever.


Perhaps the time has arrived for Gold investors to be less critical of Bernanke's policies. Instead, we might want to consider that Bernanke could be our BFF too. With a continuation of the intellectually bankrupt policy called quantitative easing by the Federal Reserve we may now have a Bernanke "Put" on Gold.

Federal Reserve Bank Credit

Above chart is one we have discussed many times. The blue line in that chart, using the left axis, is Federal Reserve Credit. Essentially, it is the size of the Federal Reserve's balance sheet. That data is released weekly on Thursday afternoon.

We have expanded the actual data by projecting out the Fed's balance sheet for the next year. That forecast is done using the stated policy of buying $85 billion per month of bonds. By this time next year the Fed's assets will be about $4 trillion. Contrast that with level of those assets two years ago. At that time they were slightly more than $2 trillion. In two years the Federal Reserve will have almost doubled the size of its assets by buying bonds.

Never in history has the premier central bank of the world acted so irresponsibly!

Red line in that chart, using right axis, is the year-to-year percentage change in the size of Federal Reserve Credit. By this time next year, the rate of increase in those assets should approximate the level reached in August/September of 2011. That is the last big hump in that line.

What was important about that period of time? September of 2011 was when $Gold reached its high.

Will history repeat itself? Odds are very good that it will. Hard to imagine the currency of a nation appreciating with such horrible monetary policy. Only the Keynesian quacks can believe that such a policy will benefit the nation. Global purchasing power of the dollar could quite likely begin to crumble by this time next year. That might be especially true with the economy killing regulatory and tax policies being advocated by the Obama Regime.

How should investors be responding to the efforts of our new BFF, the Bernanke Federal Reserve?

  • Gold coins should be the primary investment with Gold ETF used as a secondary.

  • Investors with adequate exposure to Gold might want to consider some dividend paying Gold stocks with a history of more than two years of paying dividends.

  • Holders of Silver should consider switching into either Gold or Chinese Renminbi.

  • Excess cash reserves should be invested in Chinese Renminbi through either a bank deposit or ETF, not an ETN.

By Ned W Schmidt CFA, CEBS

Copyright © 2011 Ned W. Schmidt - All Rights Reserved

GOLD THOUGHTS come from Ned W. Schmidt,CFA,CEBS, publisher of The Value View Gold Report , monthly, and Trading Thoughts , weekly. To receive copies of recent reports, go to www.valueviewgoldreport.com

Ned W Schmidt Archive

© 2005-2022 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