Tags: Fed | Money | Printing | investors | Gold

Fed's Money Printing Whets Investors' Gold Appetite

Thursday, 19 Aug 2010 12:39 PM

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The expansion of the monetary base in the United States and much of the rest of the developed world has had a pronounced impact on buyers' appetite for gold even as inflation levels remain subdued.

Internally, the debate between the Business Insider's tactical analysis and its strategic analysis of gold prices tactically discounts the traditional view of gold as an economic sentiment barometer especially useful during periods of inflation.

According to the Business Insider, much of the action in recent years comes from a trend following by managers being capitalized by fearful investors.

In other words, while economic sentiment is in fact putting the money into play in the first place, the technicals are steering the bus and currently the technicals appear to be rolling over.

However, the continuing degradation of the dollar and the euro, combined with expectations for softer growth levels going forward for several years, provides compelling evidence that holding liquid hard assets is a smart move regardless of whether or not inflationary pressure looms.

And when real quantitative easing as put forth by the recent Fed meeting is factored in, the potential is factored in for a sustained lack of confidence in the fiat currencies of the wealthy world.

In addition to frequently being an inflation hedge, gold has also been supported in recent months by ultra-low interest rates, which hinge on the Federal Reserve's view of the pace of economic recovery and inflation expectations, The Wall Street Journal reports.

Current interest rates make holding gold, which pays no interest itself, more attractive.

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