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Psychological Impact of QE3
Pinnacle Digest writes: Adam Hamilton explains the psychological impact QE3 will have on gold and silver investors. Although QE3 has started out quite small, its open ended characteristic gives it the potential to be massive – and gold and silver investors know this better than anyone. Looking back on gold and silver’s performance during QE1 and 2, one would assume that the precious metals should perform very well during QE3.
Hamilton can’t recall ever hearing the words ‘quantitative easing’ before the 2008 market crash. He notes that central bankers have a way of making rather dangerous actions sound peaceful and gentle. The reality of quantitative easing is that it is just debt monetization. However, calling it what it is would be a death wish for the respective currency being printed. So instead, central banks use friendly sounding words like quantitative easing. The general public is more accepting of such terms, but precious metal investors know it for what it is. Precious metal investors know that it causes inflation. As such, they double-down on their gold and silver investments, driving prices up further.
Hamilton stated in his recent article “Inflation is devastating, an insidious plague that stealthily impoverishes the great majority of people whose incomes don’t rise fast enough to maintain real purchasing power. Inflation slaughters the poor, who already struggle greatly to survive even without rising prices. Inflation crushes everyone on fixed incomes, nearly all retired people. And inflation robs savers blind, stealing their lifetimes’ hard-earned surpluses.”
No group has studied how inflation works more than the goldbug crowd. They have been preparing for this era of inflation for many years because, as Hamilton stated, “Once unleashed, history has proven inflation will fully run its course.”
It is important to consider, for anyone who doubts precious metal investments, that the money the Fed has printed over the last couple years hasn’t fully made its way into our economy. As a matter of fact, much of it hasn’t made it into our economy and is being hoarded by large institutions. And despite the fact that the printed money hasn’t made it into our economy in a significant way, gold and silver are up double or triple in value since 2008. So what do you think will happen to gold and silver when the Fed’s ‘monopoly money’ does make it into our economy and inflation starts to pick up steam?
What happens when savers, institutions and potentially the entire general public are scared to hold onto US dollars?
Hamilton states that “This new open-ended third one is very bullish for these precious metals.”
Savers can only take so much abuse from central banks. Eventually they will use their savings to buy and hoard more stable currencies - Currencies such as gold. After all, gold is the only currency that has truly stood the test of time.
In his well-articulated report, Hamilton goes on to explain how the Fed was forced into the treacherous path of money printing, or quantitative easing, or debt monetization – whatever you want to call it. It was brought about by the panic of 2008, poor leadership in America and slumping economic growth. These factors created a never-ending path to inflation and an ideal opportunity to buy gold and silver. With QE3, gold and silver have been given a shot to hit new all-time highs in our view. The fact that there has been no time limit set for QE3 should tell investors that the Fed has only one option. It will print money until things get better, if that’s even possible. Basically, for the Fed to state that it will continue QE3 until after the labor market has recovered tells us that it could go on for many years to come. You see, printing money hasn’t created a boost to employment in 4 years and it likely never will. However, so long as the Fed thinks it can, and the global currency markets don’t abandon the dollar, this quantitative easing policy will remain. So long as quantitative easing remains, gold and silver will continue to rise in value.
Click here to read Adam Hamilton’s full report with exclusive analysis on what previous QE programs have done for gold and silver.