Michael Snyder, Contributor
Do you want to know what QE3 is going to do to the price of gold and the price of silver? Well, you can read what the financial experts are saying below, but it doesn’t take a genius to figure out what is likely to happen. During QE3, the Federal Reserve will be introducing 40 billion new dollars that have been created out of nothing into the financial system each month.
So there will be more dollars chasing roughly the same number of goods and services, and that means that more inflation is on the way. In an inflationary environment, investors tend to flock to hard assets such as gold and silver. And it is important to remember that a lot of the money from QE1 and QE2 ended up pumping up the prices of various financial assets. This included commodities such as gold and silver.
The same thing is likely to happen again with QE3. In addition, investors now have an expectation that the Fed will continue printing money for the foreseeable future and that the U.S. dollar is going to steadily decline, and that expectation will also likely give further momentum to the upward movement of gold and silver. Of course when it comes to investing, there is never a “sure thing” and as the global financial system falls apart in the coming years we are likely to see wild swings in the financial markets. So there is definitely an opportunity when it comes to gold and silver, but anyone that wants to invest in gold and silver needs to be ready for a wild ride.
In a previous article, I compiled 10 quotes from experts about what QE3 is going to do to the U.S. economy. In this article, I have compiled 10 quotes from financial experts about the effect that QE3 will have on gold and silver. Hopefully you will find some nuggets of wisdom that you can use in these quotes from some top financial veterans….
#1 Citi analyst Tom Fitzpatrick
“When gold breaks above $1,790, many people will feel they have missed the boat, and they will go to silver instead. So silver should outperform gold. People have to remember that we are only at the midpoint of the gold/silver ratio of the last 45 years. So it is not inconceivable that we could still go lower in terms of that ratio.
If we see gold move to the $3,400 level, it is not inconceivable that we may see silver closer to $100. Investors have to remember that at the end of the 70s the gold price doubled in a mere five or six weeks. If 3 to 5 years down the line we see that the base policy of the developed world is to continue printing money, then the gloves are off in terms of what levels gold and silver could actually go to.”
#2 GATA’s Bill Murphy
“All I know is: the physical market, if you want to buy silver in size, is the most difficult in history. These are from my best sources.”
#3 Francisco Blanch, a global investment strategist with Bank of America Merrill Lynch, regarding his belief that gold is heading to $2400 an ounce….
“Given the new open-ended nature of QE3, the upward pressure on gold prices should continue until employment is strong enough to require a change in policy”
#4 Morgan Stanley Commodities Analyst Hussein Allidina
“We remain convinced that the interest rate outlook, the likelihood of continuing risk aversion because of the Eurozone debt crisis, and strong physical market fundamentals justify exposure to gold”
#5 Peter Schiff, CEO Of Euro Pacific Capital
“The dollar is vulnerable to a massive collapse . . . buy gold and silver.”
#6 Jim Rogers
“But I’m not selling any gold. If it goes down I hope I’m smart enough to buy more. If it goes down a lot I hope I’m smart enough to buy a lot”
#7 Deutsche Bank Analysts Daniel Brebner and Xiao Fu
“We would go further however, and argue that gold could be characterised as ‘good’ money as opposed to ‘bad’ money which would be represented by many of today’s fiat currencies. In describing gold as such we refer to Gresham’s Law – when a government overvalues one type of money and undervalues another, the undervalued money (good) will leave the country or disappear from circulation into hoards, while the overvalued money (bad) will flood into circulation.”
#8 Nick Barisheff, the CEO of Bullion Management Group Inc
“The message is that the era of high returns financial assets for both stocks and bonds, as Pimco’s Bill Gross has stated, is over, and gold is the primary go-to asset for wealth preservation. QE3 will only serve to accelerate this trend.”
#9 Pimco’s Bill Gross
“Gold can’t be reproduced. It could certainly be taken out of the ground in an increasing rate but there’s a limiting amount of gold.
And there has been an unlimited amount of paper money over the past 20 to 30 years and now – in this period of central bank expansion where it’s QE1 or QE2, or whether it’s the LTROs of the ECB or this potential new program … then central banks are at their leisure to basically print money.
Gold is a fixed commodity that has a considerable store of value that paper money has not….
When a central bank starts writing checks and printing money in the trillions of dollars, it’s best to have something tangible that can’t be reproduced, such as gold.”
#10 Marc Faber
“I think that the trend for gold prices will be steady, but the trend for the dollar and other currencies will be down. In other words, in dollar terms the price of gold will trend higher. How high it will go, you have to call Mr. Bernanke and at the Fed, there are other people actually that make Mr. Bernanke look like a hawk. So they are going to print money.”
Over the past several weeks (both before and after QE3 was announced) we have seen a significant rise in the price of gold and in the price of silver.
A lot of very wealthy people around the globe greatly benefited from this move.
In a previous article, I quoted an article from the Telegraph that discussed the enormous amounts of money that billionaires George Soros and John Paulson had been investing in gold earlier this year….
There was also news last week in an SEC filing that both George Soros and John Paulson had increased their investment in SPDR Gold Trust, the world’s largest publicly traded physical gold exchange traded fund (ETF).
Mr Soros upped his stake in the ETF to 884,400 shares from 319,550 and Mr Paulson bought 4.53m shares, bringing his stake to 21.3m.
At the current price of about $156 a share, these are new investments of about $88m of Mr Soros’ cash and more than $700m from Mr Paulson’s funds. These are significant positions.
According to the World Gold Council, global central banks added 157.5 metric tons of gold last quarter. That was the most gold that global central banks have ever added to their stockpiles during a single quarter.
Could it be possible that some folks knew ahead of time that QE3 was coming?
That is a very interesting question.
In any event, there is certainly a lot of hoarding of precious metals going on around the world, and without a doubt a lot of financial insiders are very bullish on gold and silver right now.
But in the financial world there is never a guarantee that something will happen.
For example, if there is a stock market crash in the coming months the price of gold and the price of silver are likely to fall dramatically.
Just take a look at this 5-year chart for silver. During the last financial crisis the price of silver dropped like a rock. In fact, it fell by more than 50 percent between late 2008 and early 2009.
So when the next stock market crash comes (and it is coming at some point) be prepared for gold and silver to take a tumble.
But how will the financial authorities respond to such a crash?
They will print even larger amounts of money of course.
And that will once again be very good for gold and silver.
So don’t let the ups and downs scare you too much.
Gold and silver are definitely in for a wild ride, but in the long-term I am extremely bullish on gold and silver. I believe that both are eventually headed into the stratosphere.
So what do you think is going to happen to gold and silver? Please feel free to post a comment with your thoughts below….
This article first appeared here at the American Dream. Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here.