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After the German high court approval of
Europe’s $600+ billion bailout program (see article),
the first of two prerequisites for higher precious metals prices is now in
place and only tomorrow’s launch of the Federal Reserve’s third
round of money printing (otherwise known as quantitative easing and expected
to also be over $600 billion) now stands in the way of sharply higher gold
and silver prices over the very near term.
As noted here
the other day, it is clearly the minority view that the Fed may not
come through as expected tomorrow, however, at this point, it really just
seems to be a question of “when”, not “if”, the U.S.
central bank joins in on the latest global money printing extravaganza, which
brings me back to some remarkable comments about money printing and gold made
by bond giant Pimco’s Bill Gross in an interview
at Bloomberg last week that, for reasons that will soon be obvious, have
stuck with me in recent days.
Gold can’t be reproduced.
It can certainly be taken out of the ground at an increasing rate, but
there’s a limited amount of gold and there has been an unlimited amount
of paper money over the past 20 years to 30 years and now … central
banks are at their leisure in terms of basically printing money.
And so, gold is a fixed
commodity. It has a considerable store of value that paper money has not. It
is certainly dependent upon the price and it’s hard to know whether
current levels for gold are the appropriate price, but, when a central bank
starts writing checks and printing money in the trillions of dollars, it is
best to have something that’s tangible and cannot be reproduced, such
as gold.
…
You know, I am not a gold bug. I am just suggesting that gold is a real asset
and will be advantaged if the Federal Reserve or the ECB central banks start
to write checks in the trillions. So what my objective is, I am not sure. I just
think it will be higher than it is today and certainly a better investment
than a bond or stock, which will probably return only 3% to 4% over the next
5 to 10 years.
While Gross was famously wrong
about the direction of interest rates last year, he’s not likely wrong
about gold and whenever someone who oversees trillions of dollars in
investments talks, people should listen.
What struck me about these
comments is that the highlighted sections above echo my feelings about
precious metals prices – so long as governments and central banks keep
doing what they’re doing, people should buy gold and you can’t
really know what the correct price is, only that it will keep going higher as
long as governments and central banks keep printing money.
It really is as simple as
that…
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