Tags: silver | gold | cash | metals

Metals Begin Their Climb

By    |   Friday, 12 Jul 2013 08:01 AM

While attending a recent conference at the National Bureau of Economic Research, Federal Reserve Bank Chairman Ben Bernanke suggested accommodative monetary policy would remain in place for the foreseeable future due to tight fiscal policy, high unemployment and low inflation. He anticipates this policy will remain in effect even if unemployment drops below 6.5 percent, more than 1 percentage point below the current level.

While the Fed might slow its bond-buying program, it could still use a low-interest-rate policy to assist the economy. This high degree of liquidity might ameliorate some of the recent downward pressures on the equity and bond markets in the near term.

It would also place upward pressures on the precious metals market, which tend to do well in periods of economic and financial uncertainty, high monetary liquidity and low real interest rates.

The fundamental and technical dynamics favor the metal markets as I described in two recent articles. Two weeks ago, I recommended the purchase of silver, and last week, I recommended the purchase of gold. Since then, silver has risen more than 8 percent and gold has increased nearly 3 percent.

Gold and silver are ductile and can be liquefied into infinitesimal parts to preserve purchase power parity for goods and services over long periods of time and across multiple geographies. This characteristic qualifies these metals as valuable monetary exchange assets. Precious jewels, such as diamonds, do not possess this quality, since their values are primarily determined by size, purity and cut.

Transaction exchange for these metals can be facilitated by digitized certificates, with physical storage handled by insured facilities. For security measures, one does not carry their entire wealth in the form of cash. The same is true for gold. However, given the high density of gold, transporting your entire wealth in gold form would be preferable to holding cash.

For these reasons, the time is ripe for an upward move in these metal markets over the next six to 12 months.

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While the Fed might slow its bond-buying program, it could still use a low-interest-rate policy to assist the economy. This high degree of liquidity could place upward pressures on the precious metals market.
silver,gold,cash,metals
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2013-01-12
Friday, 12 Jul 2013 08:01 AM
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