When Federal Reserve Chairman Ben Bernanke hinted at QE2 in August 2010, the stock markets had been falling throughout the first half of the year. Economic growth was sub-par, and Chairman Bernanke felt the pressure to ease the economic pain by printing money. (4) Formally announced in November, QE2 sent bond yields, stocks and gold prices soaring. (5) While bond yields eventually came back down, as did stocks, gold has continued to march upward. A similar set of conditions that led to QE2 are now present, giving rise to speculation that the announcement of QE3 is imminent when the Federal Open Market Committee meets on August 9.
Even if QE3 is not announced, gold prices will continue to go up. The popular finance blog Zero Hedge featured a chart showing the close correlation between increases in the debt ceiling and the price of gold. The blog has now created a second chart showing the projected gold price up to the limit of the new ceiling increase: $1,950 or higher. (6) Reputable commentators from around the world have warned of the inflationary dangers resulting from increasing the debt ceiling. Investors are afraid of further devaluation of the dollar, and some are even warning of an eventual hyperinflationary collapse, putting the dollar on the list of failed fiat currencies. (7)
The best way to protect oneself from inflation or hyperinflation is to buy precious metals or other commodities. Gold and silver are preferred to oil, foodstuffs and industrial metals because they are easier to acquire. Several bullion dealerships have been making money lately buying and selling gold to investors and ordinary citizens concerned about the current economic climate. Gold prices reflect inflation expectations as well as traditional benefits like diversification and gold’s safe-haven status.
Related : How To Invest In Gold?
Jeff Johnson is a retired money manager, as well as a part time car insurance agent. If you’d like to reduce your monthly expenses consider comparison shopping with some online auto insurance quotes.