While my crystal ball is in the shop, and I am unable to tell you exactly what will happen in the co...
Gold Buyers Looking for More Easing
04/18/2012 7:00 am EST
Gold jumped on April 10 in reaction to the decline in world stock markets, so MoneyShow’s Jim Jubak believes gold bugs are looking for a new round of global stimulus.
When the market sold off pretty much around the world on April 10, gold went up. Now, some of that is fear, but that’s not really what’s driving the rally in gold on a day like that.
Basically, what investors did is, they looked around the world and said, "OK. Again, we’ve got a Spanish crisis, we’ve got an Italian crisis, we’ve got a European debt crisis. Again, how are we going to solve that?" And they said that the only way, really, to solve that—to get growth going—is another round of monetary stimulus.
They don’t know who it’s coming from, but it’ll come from somebody. Either the European Central Bank will go back and start buying Italian and Spanish bonds again, or the US Fed might do a new round of quantitative easing if the US economy is starting to slow. If China looks at this and says, "Oh well, Europe is our biggest export customer, and they’re slowing, so maybe we’ll goose our own money supply." The Bank of Japan, same thing.
All these things add up to gold investors saying, "OK, so somebody, maybe lots of somebody, are going to roll the printing presses," and therefore gold, the hard asset which holds its value when money starts to depreciate in value, would be a good place to put your money.
Now, when it looked like the crisis was over in Europe in January and February, gold really didn’t do very well. It went down, and that wasn’t, again, just because of fear, but for the sense that the central banks aren’t going to have to run the printing presses.
So what you’re seeing is a reversal of that. The markets are going from a situation where they believed that we weren’t going to need a whole lot more stimulus, to a situation where they believe that we are going to need a whole lot more stimulus; that we’re going to have another round of moneyprinting from everywhere. That would be good for gold prices.
Related Articles on COMMODITIES
Markets are now in their Santa phase. Expect rallies with brief interruptions for consolidation or p...
The pound has acted well against the dollar in the midst of Brexit. Friday was a reversal day. I am ...
Until the GDX is able to break below 21, the bulls have an opportunity to prove themselves as we hea...