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Discussion Topics -- September 13, 2012
QE3
Europe's Unlimited Bond Purchases
Gold Breaks Sharply Higher


(September 13, 2012 discussion) QE3 is here! We're not sure its deserving of an exclamation point, but after much anticipation, the Federal Reserve announced yesterday a third round of asset purchases, comprising of open ended $40 billion per month purchases of mortgage backed securities and an extended rate guidance to 2015. Moreover, the Fed statement clarified that accommodations would not be removed even once the economy started to recover. The 'infinite' quality of this QE package sent gold racing, and the dollar turned sharply lower. The potential success of quantitative easing measures remains in question. Much of what is occurring in our economy is the macroeconomic result of an aging baby boomer population that is no longer earning peak income, or laying out peak expenditures. As debt levels become unfathomably large, one can't help but wonder if the Fed's doing more harm than good. Physical gold ownership is a critical portfolio component given this context. Central Bank behavior all over the world suggests such advice isn't restricted to individual investors. Across the pond, Europe has initiated its own version of QE, labeled as "unlimited periphery bond purchases" where they to have placed no cap on the amount of money they'll inject into their failing bond markets. Of course, the ECB has promised to 'sterilize' their purchases so as to avoid inflationary pressures, but it remains to be seen whether said 'sterilization' with be anything more than a big confusing word. The two catalysts worked to move gold out of its nearly year-long consolidation, with price now challenging the $1800 level. Also discussed is increasing instability in the Middle East, a re-visitation to the counter-party risk reality that is the futures market, and a brewing renewed banking crisis in Dubai. 33 Minutes, with Jonathan Kosares, Peter Grant and George Cooper.

Figure 1

Gold Weekly

Figure 2

House hold Income

Figure 3

Debt to GDP

Figure 4

Dollar Index

Figure 5

Gold Graph Including summer d

Figure 6
Gold in Euro

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