Back in late April, I illustrated the poor performing environment of the precious metals sector and predicted a continued decline in bullion prices. I pointed to three leading factors, which has an adverse effect on bullion prices including: (1) the market fearing an end to the QE program; (2) an economic slowdown in China; and (3) India's continued economic deceleration. Recent events that took place suggests a rise in bullion prices (in particular silver) is just around the corner. 1. Bernanke signaling no early end to QE Yesterday at the FOMC meeting, Ben Bernanke indicated that the Fed will keep its money printing presses ramped up for the next little while, stating that "highly accommodative monetary policy for the foreseeable future is what's needed for the U.S. economy." Global equity and commodities markets rallied following Bernanke's seemingly dovish comments about the QE program. Why is this significant? An end to the Fed's QE program means that the rate of U.S. inflation will likely fall, meaning investors have less incentives to hold precious metals (both gold and silver but particularly gold) in order to avoid a corresponding decline in the value of cash investments. Why the Fed can't and won't end the QE program The U.S. economic recovery is so weak and the global economic condition is the worse we've seen in a long time (especially in the EU). Over the past year, more than 2 trillion USD in AAA bonds were issued around the world in order to stabilize the global economy. So if central bankers stop doing that (i.e. end the QE program) the bond markets will crash and mayhem will rip throughout the global financial markets. As long as QE continues, the fear of inflation or hyperinflation exists and so precious metals will look increasingly attractive to investors.

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