Gold and silver prices both gained yesterday, with the front month Comex gold contract recording its highest settlement price since May 2, up $4.80 (0.3%) to $1,546.50 per troy ounce. Silver also gained, with the Comex June silver contract rising by 58.9 cents (1.6%) to settle at $36.776 per troy ounce.
Despite the ongoing sovereign debt woes afflicting the likes of Greece, Ireland and Portugal, European stock markets have moved higher this morning on the expectation that the US Federal Reserve Chairman Ben Bernanke will demonstrate his commitment to quantitative easing and a loose monetary policy in a speech to the International Monetary Conference in Atlanta, Georgia, at 19.45GMT. This speech could also result in a spike in precious metal prices.
Though Bernanke is under pressure to commit the Fed to more money printing, he does not enjoy the same political cover that he did last summer when “QE2” was announced. More Americans are becoming concerned about the potentially inflationary consequences of these policies – not least “Tea Party” Republicans in the US House of Representatives, such as Congressman Ron Paul from Texas, the current Chairman of the House Subcommittee on Domestic Monetary Policy and Technology.
Interestingly, even the Federal Reserve Bank of New York is starting to warn that “inflation is heating up across the board”, contrary to previous comments from New York Fed president William Dudley.
This is perhaps why any new inflationary QE-style policy from the Fed may not be called quantitative easing. Though the mechanics of the process may differ subtlety from QE, the objective will be exactly the same: devalue the dollar in an effort to reduce the real value of debt, shore up banks’ balance sheets and to get consumers spending again.
No US president since Franklin Roosevelt has won a second term when the unemployment rate on election day stood at or above 7.2%. With even establishment political operatives such as James Carville now warning that civil unrest in response to the poor economic situation is “imminently possible”, Obama and Bernanke could yet be facing an ever messier situation.
