Gold and silver by palitos83


									2011-08-18 “QE3 most likely scenario.” support gold price

The gold price, at $1,785 per ounce, traded near unchanged on Wednesday
following the news that producer prices rose more than anticipated. The
price of gold showed a muted reaction to the release of the Producer
Price Index (PPI), which rose 0.2% month over month and 7.2% year over
year – both slightly hotter than a Bloomberg survey of economists.
Commodities moved higher across the board with crude oil rising 1.5% to
$87.99 per barrel and copper advancing 0.6% to $4.04 per pound. Silver
rose above $40, climbing $0.15 to $40.05 per ounce.

In the U.S., the gold price also indirectly received support from a
Goldman Sachs research report. In a note to clients, Francesco
Garzarelli, chief interest-rate strategist, altered his monetary policy
forecast to include a third round of quantitative easing (QE3) in its
“QE3 most likely scenario.” support gold price.
“The central bank has indicated that its current economic forecasts
warrant policy rates remaining close to zero for at least another two
years and that it stands ready to expand its balance sheet further if
needed,” Goldman‟s Garzarelli wrote. “We have built a third round of
long-term asset purchases („QE3‟) into our baseline, although that is, of
course, contingent on sub-trend growth in the near term.”

While Goldman Sachs did not discuss the implications of QE3 for the gold
price in the report, history suggests it would be quite favorable for the
price of gold. Richard Russell, a long-time gold bull and author of Dow
Theory Letters, presented his case for higher gold prices.

“When chaos reigns, people look for certainty,” Russell wrote in a recent
letter. “When all is lost, only one item stands supreme and has been
supreme for thousands of years. That item is gold…The anti-gold element
is afraid of gold hitting the even number of $2,000, thus we see gold,
day after day, fluctuating in the $1,500 to $1,700 area, but never
breaking out to $1,900, or God forbid – $2,000.”

Russell went on to say that “At $2,000, the next objective would be
$2,500, and from there $5,000, and from $5,000 – $10,000. As gold marches
higher, it‟s playing the death knell for fiat money. And every central
banker knows it.”


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