The Federal Reserve on Gold and Silver
The Federal Reserve does not directly comment on gold and silver. For the first time in the living memory, the Fed sent a clear signal to sell gold and silver.
The market participants did not listen and ran both gold and silver up. After the 12:30 pm EST announcement from the Fed, gold ETF [s:GLD] and silver ETF [s:SLV], gold miner ETF [s:GDX] and popular miner stocks such as Newmont [s:NEM], Barrick [s:ABX] and Silver Wheaton [s:SLW] saw explosive buying.
Famed investor Benjamin Graham, said that in the short term the market is a voting machine, but in the long term it is a weighing machine. In other words, in the short run gold and silver moved based on the prevailing consensus opinion, but in the long run the true value of gold and silver will be reflected in their prices.
After the 12:30 pm Fed announcement, gurus were out in full force recommending aggressively buying gold and silver.
‘œFed Promises Exceptionally High Inflation For Three More Years,’ shouted the headline from a well circulated newsletter.
Previously, the Fed statement promised exceptionally low interest rates until mid-2013. In the 12:30 pm statement, the Fed said that it expects exceptionally low interest rates until late 2014.
The Fed action amounts to QE2.5 (Quantitative Easing).
The foregoing Fed move was interpreted as inflationary and it made sense for gold and silver to spike.
In other words, the Treasury’s printing presses will run harder and longer. Up to this point, gurus and investors were right in running gold and silver up…Read more at MarketWatch
