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Gold Price Bounces Back Through $1,350

Release Date: 
Monday, February 7, 2011

GOLD PRICE NEWS - The gold price oscillated near unchanged Monday morning, trading just above $1,350 per ounce. Despite modest strength in the U.S. dollar, the price of gold managed to move slightly higher. Gold's more volatile sister precious metal, silver, gained $0.15 to $29.29 per ounce.

Stock prices on Wall Street were set to open higher as healthy risk appetites in the global marketplace has led to asset allocation changes in favor of stocks over bonds. SandP 500 stock futures rose 3.20 to 1,310.40, following Europe's benchmark, Stoxx Europe 600 Index, higher. Treasury prices are lower for the sixth consecutive day with the 10-year yield rising to 3.65%.

Despite a more buoyant economy, monetary policy in the U.S. remains at crisis levels. Bernanke's dismal characterization of the employment situation fueled speculation that, despite the flurry of better-than-expected economic data points, the Fed is considering a third round of quantitative easing (QE3). On Friday, Lance Lewis of posted a summary of Annaly Capital Management's (NLY) earnings call, in which its CEO, Mike Farrell, echoed this speculation. Annaly is the largest residential mortgage REIT in the U.S. and Mr. Farrell is considered by many in the financial community to be "one of the brightest minds in the fixed income/MBS (mortgage-back securities) markets," according to Minyanville.

When asked about Fed policy going forward, Mr. Farrell responded that "The Fed has expanded its balance by $2 trillion in an effort to stabilize the credit/housing/MBS markets. We believe that job has pretty much been accomplished. We now believe the Fed must focus its attention on stabilizing state and local municipal finances as well as addressing the low level of employment. We have always maintained that it would take a $4 trillion-plus Fed balance sheet to accomplish this task, and we do not see anything on the horizon to change our opinion."

Farrell's comments suggest that depending on the size of further rounds of quantitative easing, not only may the Fed implement QE3, but QE4 and QE5 may also be in the cards. If Mr. Farrell is correct with respective to his outlook for future Fed policy, the macro-economic climate will favor tangible assets such as gold and new all-time highs in the gold price will be forthcoming in future quarters and years.

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This article is independently provided by and does not represent the views or opinions of Goldline International, Inc. Although the information in this article has been obtained from sources believed to be reliable, Goldline does not guarĀ­antee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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