The FED recently announced it would not engage in any more quantitative easing. This forced gold to dip in price. Quantitative easing is really nothing more than pumping more money into the economy. This devalues the dollar and raises inflation. Gold investors had hoped the FED would indeed prime up the economy with more dollars, because gold prices tend to perform better when the dollar is weaker and inflation pressures are present.
As a result, the dollar has remained stronger and gold lowered in price. However, to suggest the current gold bull market is at its end is absurd. Yes, gold dipped in price, yet it is still trading at $1600 per ounce. While another round of quantitative easing would have propped gold up, the reality is most of gold’s performance since the recession began has been done without quantitative easing.
Quantitative easing is not the only catalyst for inflation. Currently, high food and gasoline prices in the United States are increasing inflation worries. So far, the economy has been able to absorb these two critical markets. However, if food and oil prices do not drop soon inflation could indeed be on the way back. While this is bad for the economy, it is good for gold. Yet, inflation is the very reason you should invest in gold. This might sound confusing so investing in precious metals with experts, such as Regal Assets, by your side would be wise.
The reality is, even without quantitative easing, the FED is still filling the economy with large amounts of dollars, more than the economy actually needs. This is the FED’s way of insulating us from Europe’s financial woes. Yet, the dollar has shown strength. This is not real strength. The dollar is simply not as weak as the Euro.
However, filling the economy with more dollars has kept food and oil prices from dropping. For this reason, quantitative easing is not needed, even though some gold investors wished for it. There is enough bad economic news coming out of Europe to keep gold high. China’s economy has also slowed, in part because Europe is buying less manufactured goods. This means gold’s demise is premature.
In closing, the FED announced it would not engage in another round of quantitative easing. Since the FED is already pumping huge amounts of dollars into the economy to protect the US from Europe’s debt problems, the measure is not needed. There are ample economic woes going on in the world to keep gold’s current bull market going for the foreseeable future.