Los Angeles – Gold bullion prices rallied on Friday to $1357 an ounce up nearly 2 percent for the week.
Silver closed higher at $24.57 an ounce, a gain of over 6 percent for the week as JPMorgan Chase & Co. and HSBC Holdings Plc were served with lawsuits by investors accusing the two banking institutions of conspiring to drive down the price of silver and reaping hundreds of millions of dollars in illegal profits.
The week began with Monday's Treasury auction of Treasury Inflation Protected Securities (TIPS) that sold at a negative yield for the first time ever. It seems that investors were willing to pay the government simply for the right to own these inflation protected securities.
The strong demand among investors reflects the pro-inflation stance of the Fed's policies. “The Fed has put the world on notice that the dollar can no longer be viewed as a safe-haven currency,” Michael Pento, economist at Euro Pacific Capital in New York, said in a report.
“During the next crisis, investors should seek the safer harbor that is derived from owning commodities and precious metals.” The Standard & Poor's/Case-Shiller 20-city home price index fell 0.2 percent in August from July and showed fifteen of the cities with monthly price declines.
Weak consumer confidence and falling home prices have increased investors expectations that the Fed will begin a second round of monetary easing at this week's FOMC meeting on Nov.2-3. It's almost a foregone conclusion that there will be quantitative easing.
"Consumer confidence … is still hovering at historically low levels," Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement. The markets are reflecting investor’s uncertainty as they wrestle with how much money the Fed will eventually inject into the economy through QE2.
Estimates have varied widely as to how long the Fed will be printing new money and how much it will eventually print, from $250 billion to as high as $2 trillion. Due to the Fed's steadfast commitment to fighting deflation, Gold is likely to continue its steady ascent in the months to come.
– – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –
American Bullion specializes in adding gold and silver to retirement accounts. If you have a question or would like to know more about your investment options, please call American Bullion at 1-800-326-9598 to speak with a precious metals specialist.