Tags: money | printing | us | fed

Let the Money Printing Begin!

By    |   Thursday, 14 June 2012 08:23 AM EDT

As I mentioned in my most recent issue of Gold Stock Adviser, there seems to be a four-year cycle in gold and precious-metals stocks.

Right now, we are just coming out of the bottom of this cycle. The last three times this happened — 2000, 2004 and 2008 — all yielded great buying opportunities for gold and gold stocks.

It is funny how cycles often lead the fundamentals. Right now we are in the midst of this bottoming and the fundamentals are setting up perfectly.

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Regardless of whether the anti-austerity or pro austerity parties get into power in Greece, I see a Greek exit from the euro and a default within the next 3 to 9 months. I just don't think Greece can meet the austerity measures imposed upon it.

Once Greece exits the euro, then the European Central Bank (ECB) can really begin to print money to buy Spanish, Italy, Irish and Portuguese debt. The ECB knows that Greece is a basket case and that the nation is beyond help. However, Spain and Italy can still be saved. That is why I see a Greek exit as positive because that will allow the ECB to deal with Spain and Italy.

Then we have economies in China and India slowing. They will both be loosening monetary policy and cutting rates this year.

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Many called the recent Chinese rate cut a surprise as they called the recent Indian rate cut the same thing. However, it didn't surprise me. Both countries are going to grow about 1 percent lower than their recent averages so they are going to start to ramp up loans and borrowing again with loose policy.

Then we have the United States. America is seen as the tallest midget. However, the United States is still a basket case. The deficit is $1.5 trillion, there are no plans to deal with this and won’t be any until December at the earliest.

The U.S. economy is showing signs of slowing. I expect that by year’s end, the Fed will start some sort of QE3 to spur growth and markets.

So there you have it: China, India, Europe and the U.S. will all be loosening their monetary policies by year’s end. That sounds like a perfect recipe for gold, commodities and other risk assets.

Therefore, if you see a cheap stock in one of these sectors, I would consider buying it in hope that things will pan out going forward.

About the Author: David Skarica David Skarica is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He also writes the Gold Stock Adviser. Discover more by Clicking Here Now.

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Thursday, 14 June 2012 08:23 AM
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