Ben Bernanke’s move in early July to begin a third round of quantitative easing, or so-called QE3, has done little for economic growth, according to latest figures, but it has benefited gold, silver and oil trading by cheapening the dollar, analysts say.
“The dollar is selling off compared to gold because of the market’s belief that the recent round of QE3 is going to cause a weaker dollar with investors bidding up gold prices,” Mark Martiak, senior wealth strategist at New York-based Premier Financial Advisors, told The Post.
And it’s not just gold. Since the Fed chief announced the latest round, unleashing $40 billion a month to purchase mortgage bonds, the greenback has depreciated 10 percent against the euro.
Gold has risen 13 percent, and silver has soared 26 percent, while crude oil rose 9.5 percent.
And if you expand your time horizon out to when the Fed began its easing operation in November 2008, gold has risen 148 percent, or more than $1,000 an ounce, as the Fed has added over $1.9 trillion to its balance sheet.
“Essentially, gold is a hedge against central-bank fiscal policy and against inflation,” Martiak said. “The market always disciplines politicians.”
According to Martiak, “Gold is a noncorrelated asset class and an inflation hedge for investors. The International Monetary Fund’s growth forecast is for slower growth, so while there was a dip [in gold prices], it had more to do with some market sentiment overall and not because investors are lacking confidence in gold as an asset class.”
Martiak thinks the Fed’s latest actions could support gold. He said that by historical standards, gold has been the biggest beneficiary of low real interest rates.
Gold bugs are not complaining. They see a rising asset class that could fatten portfolios hammered by poor returns elsewhere. Bernie Petit, a financial planner with Beacon Financial, sees renewed interest among his clients for the precious metal.
But he’s not buying into it. “When people call me to buy gold, I try to dissuade them from buying,” said Petit. “Some people mistakenly feel as though it is a safe investment, it is secure, and it is only going to go up — and I believe all of those things are wrong.”