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Discussion Topics -- December 14, 2012
and What Lies Ahead

(December 14, 2012 discussion) It was an exciting year for gold, with daily movements in the price highlighted primarily by either escalations in the ongoing European debt crisis, or rumors/announcements of various QE measures by the Federal Reserve. In the end, gold is finishing the year just shy of 10% higher that where it started. A respectable showing in an uncertain landscape. While it may not be entirely reflected in the price, gold demand at USAGOLD has picked up sharply following the election as investors eyes turned from the unknown of who would be Commander in Chief back to the mounting debt and deficit problems highlighted by the upcoming Fiscal Cliff. While the debate is already raging on whether to raise taxes or cut spending, and is likely to intensify, the feeling here is that it amounts to more talk than turkey. Even if the proposed $180bln in cuts are agreed upon, it would amount to nothing more than a minor slowing of our current debt contributions. Right now, the federal government borrows 46 cents of every dollar it spends. The cuts being discussed would only lower that to 41.5 cents of every dollar spent. The unknowns surrounding the Fiscal Cliff may have been partially responsible for Bernanke's decision to institute an expansion of QE3 on Wednesday. Now included will be $45 billion in direct Treasury purchases on a monthly basis. Gold didn't respond as positively to this news as it has in the past, largely because the continued implementation of these measures has now been tied to both the unemployment rate, and the inflation rate. The market sees this as resulting in potentially shorter-lived monetary injections, though we're not so sure. Projections on the unemployment rate don't suggest an improvement before 2015, which was already the date set for rate guidance. So while the initial reaction is that this my curb injections sooner than expected, it is equally possible the exact opposite could occur. Another interesting thing to put on your radar is that the Federal Reserve charter is due to expire this coming year. It might be interesting to see if any kind of debate is risen in the vein of Ron Paul as this approaches. 39 Minutes, with Jonathan Kosares, Peter Grant and George Cooper.

Figure 1

QE Chart

Figure 2

gold and election

Figure 3

Gold 1 Year


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