Finance in Focus Sept 2012

Posted on 14th September 2012 by Trevor Reynolds in Finance in Focus

Congratulations to everyone who got some gold and gold shares in the last several months!  

As we said in the Summer Finance in Focus  and numerous times this year to invest in gold – QE#3 was coming and gold investors will be rewarded.

We will be updating in our next Finance in Focus the likely direction of gold in the next few months. 

Recent trades we can highlight;

 Silver Wheaton buy; on average $25 – we are now trading at just over $37.  

GDXJ – junior gold miners average buy; Average $20 – we are now trading at $24

BMG Bullion funds – average buy $12 now trading at $13.45

There is one more thing that Bernanke could do, to become a gold bug’s best friend, it would be to announce QE to infinity.   Today’s 40 billion per month is the Fed’s final shot and it means the terminal start of currency debasement is now here. 

It also means that the path to all time nominal highs in gold, which is now just $160 away, silver, platinum, and all other metals, as well as all other hard assets is now clear. The first target is the inflation adjusted high of $2,300. 

Nothing goes in a straight line and we expect the sector to slow in the next couple of weeks. This is not the end of the rally! Just the beginning. And the next several weeks will give everyone a new buying opportunity to add or create new positions.

Bernanke’s remarks included the boast that Fed policy had created stable inflation over the past decade. That would mean CPI inflation, which calculation has been suspect since the Clinton revision. But financial asset inflation and volatility has become dangerous. This cannot work out well, despite the belief that massive stimulus will revive the failing global economy. The 24 percent plunge the price of China’s iron ore price is a voice of opposition to Fed and ECB wishful thinking.  

We can’t help but wonder about Romney’s statement that as president he would retire Bernanke from the Fed. Perhaps the MBS buying program is an attempt to help Obama, which would likely insure that Bernanke’s career as the master inflator continues. 

Going forward QE is only part of the answer. In the next several months we have the fiscal cliff, Europe & China’s economies and the mix of all these outcomes will be very important.

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