Why Fed Money Printing Will Lead To Higher Gold Prices

It’s no secret that precious metals have disappointed many investors in recent months after prices failed to move higher following the announcement of more money printing by the Federal Reserve late last year.

So far in 2013, gold and silver have moved steadily lower based in large part on the idea that despite the central bank creating $85 billion per month in new money, inflation is not a near-term threat (and maybe not even a long-term concern).

In recent weeks, investment banks have been falling over themselves in an attempt to downgrade their precious metals price forecasts sooner and farther than their competitors and this has helped to sour sentiment. Also, record outflows from gold ETFs such as the SPDR Gold Shares (GLD) have added to the selling pressure.

Based on what you might read in the mainstream financial media these days, you may as well stick a fork in the secular gold bull market because it’s all but done (and maybe silver too), but there’s a very good argument to be made for why that is not so.

In short, now that the latest round of Fed money printing is causing the monetary base to grow, higher inflation is likely to follow. Then, perhaps suddenly, investors and traders will flock back to precious metals.

Allow me to explain.

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One Response to Why Fed Money Printing Will Lead To Higher Gold Prices

  1. Anthony March 6, 2013 at 10:12 PM #

    Mr Iacono, check out the call options for SPDR Gold Shares (GLD)


    Looks like everyone is hedging that GLD will go up about 20% over the next 12 months.

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