By Patrick A. Heller
Commentary on Precious Metals Prepared for CoinWeek.com
As I explained in my last column, the German Constitutional Court on Wednesday concurred with the legality of the European Central Bank’s plan to engage in quantitative easing of the Euro. The reason I expected this result was that the ECB’s governing documents had a loophole that allowed for inflation of the money supply no matter what the German Court decided.
However, I did mix up my dates of this week’s Federal Open Market Committee (FOMC) meeting. Just about every such meeting is held on Tuesdays into Wednesday, so I didn’t pay attention that this week’s meeting was scheduled for Wednesday and Thursday.
So, my expectation of a double blow to world currencies on Wednesday was not exactly accurate. The German court came through with their expected result, after which gold and silver prices started to rise. However, the US government simply cannot allow such price increases when the FOMC is meeting. For gold and silver to rise would be a market signal of incompetence by US government officials.
Therefore, once again, gold and silver prices were knocked down Wednesday afternoon.
But don’t worry. As I write this Wednesday evening, I anticipate the turn around and a significant price increase on Thursday afternoon after the Feds issue their end-of-meeting announcement.
After suggesting that gold and silver prices will rise after Thursday’s Fed announcement, I have an additional observation to share.
I previously clued you in that gold and silver prices are suppressed just before a major economic speech by the US president, Treasury secretary, or Fed chair or the release of important economic statistics such as the monthly Non-Farm Payrolls report that came out last Friday. What I neglected to say is that the more severe the suppression of prices, the greater would be the rebound.
The greater-than-normal effort by the US government and its trading partners and allies to hold down gold and silver prices rather than letting them rise after the German court announced its decision on Wednesday leads me to expect larger than usual price increases after the FOMC announcement Thursday. Last Friday, the spot price of silver jumped more than a dollar from the previous US close. I would not be surprised for silver to close on the US COMEX Thursday at least a dollar higher than it closed on Wednesday this week. I also expect a similar move in the price of gold.
My local newspaper carried a story in last Sunday’s edition to the effect that the author was just now realizing how extensive the US and world’s financial problems really are. The story was presented as if this was a fresh sudden development. Sorry, I have been discussing the growth of these crises for several years, and I’m not the only one who has done so. While a large percentage of the public still doesn’t realize what is happening, readers of this column should know better by know.
Patrick A. Heller was honored with the American Numismatic Association 2012 Harry J. Forman Numismatic Dealer of the Year Award. He owns Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Numismaster (under “News & Articles) . His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com.