QE3

13-Sep (USAGOLD) — While the FOMC is launching QE3 with a renewed focus on agency mortgage backed securities, the following line from the statement is important:

If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability.

What the FOMC is saying here, is that if this doesn’t work, we’re going all-in.

Additionally, in saying “a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens,” the FOMC removes any market concern about rate hikes, even if the data improve.

Not surprisingly, gold has surged in the wake of the statement and in conjunction with the ECB’s unlimited bond buying, this is a recipe for new all-time highs in the yellow metal.

[Full Statement]