Fed Feeds Silver Price Surge
Source: Silver Investing News, Melissa Pistilli (3/20/09)
". . .the silver price rallied to a three-week high, up 12.7% to $13.44/oz on the COMEX on Thursday morning, outperforming gold."
Silver and gold prices are riding high after the Fed's surprising announcement Wednesday that it will be implementing "quantitative easing measures" by purchasing $300 billion in longer-term Treasuries. The central bank is also planning to buy $750 billion in mortgage-backed securities and agency debt.
It's not just the $1.25 trillion that's got the markets sweating; it's the underlying meaning behind the Fed's use of "quantitative easing measures."
"In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability," the Fed said. Apparently, "these circumstances" are seriously dire. These "tools" are considered the last resort for institutions like the Federal Reserve. Think "nuclear option" for any Western leader. When all else fails. . .
Precious metals analyst Mark O'Byrne warns that the Fed's actions could lead the world into an "international monetary or currency crisis" as other central banks follow their lead creating "competitive currency devaluations."
Of course, rising long-term inflation is actually good news for precious metals prices as investors seek a safe-haven for their assets. And that's why we're seeing the surge in silver and gold prices today. "Investors are concerned about a systemic collapse of global financial markets and mechanisms," said Citigroup analysts. Citigroup has increased its 2009 silver average price forecast 25% to $12.50/oz and its 2010 average price by 13% to $13.60/oz.