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Gold Price Steady, Bernanke to Employ QE 3.0?

Release Date: 
Monday, December 6, 2010

GOLD PRICE NEWS – The gold price held firm at $1,415 per ounce Monday morning despite the U.S. dollar rising against the euro for the first time in four trading sessions. Fed Chairman Bernanke, in a rare interview with 60 Minutes, highlighted the weak labor market as a key driver of the central bank’s on-going quantitative easing (QE) initiative. The Fed’s QE program, slated to rise above $2 trillion in early 2011, has helped bolster the gold price to all-time record highs. With its 2.1% gain in December, the gold price has now appreciated 29.1% thus far in 2010.

What is the current outlook for the gold price after what has been strong performance in recent years? According to Goldman Sachs, the combination of low real interest rates and the weak dollar should drive the gold price up to $1,750 per ounce in 2012. As long as the world’s leading central bankers are engaged in efforts to stimulate their economies with rock bottom interest rates, the gold price should be well-supported. Until the time that investors can earn a decent real rate of return on their capital, gold appears set to continue its pattern of making higher lows and higher highs.

With consumer price inflation registering multi-decade lows and the unemployment rate sitting just under 10%, deflation remains enemy number one. In an interview that aired last night on 60 Minutes, Federal Reserve Chairman Ben Bernanke painted a bleak outlook for the U.S. employment situation, stating "At the rate we're going, it could be four, five years before we are back to a more normal unemployment rate."

Bernanke noted that a key rationale for implementing the Fed’s controversial quantitative initiatives centered on the stubbornly high unemployment rate. Since March 18, 2009, the infamous day that the Bernanke-led Fed announced it would engage in a money printing campaign, the gold price has soared 59%. Investors have moved to protect their savings from currency debasement and have increasingly moved to allocate a portion of their portfolio to gold and investments tied to the gold price.

When asked about the possibility of yet another round of QE, Bernanke, stated “Oh, it's certainly possible.” With no end in sight to the Fed’s efforts to extinguish deflation, the macro-economic backdrop for the gold price remains positive. Gold is set to rise for the tenth consecutive year and with Bernanke’s foot pressed firmly on the printing press, it appears highly likely that this pattern will continue in 2011.

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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 guar­antee 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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