Today we’ve got the Federal Open Market Committee meeting. There has been speculation about the likelihood of another round of quantitative easing (QE). The recent poor US data suggests that a second round of QE could come soon. Weighing against any further stimulus must be the $1 trillion EU-IMF European bailout package earlier in the year. The initial positive market reaction faded remarkably quickly, so given the diminishing returns, further QE in the US will have to be sizeable. Not only would this add to the budget deficit, but it could terrify investors.
Against this background, silver and gold continue to soar. For as long as policymakers insist that boosting exports will save the economy while ignoring the fact that we can’t all run trade surpluses simultaneously, there will be a rush to devalue every fiat currency. As a result, precious metals would seem to be the most sensible asset for investors, being both a store of value and the ultimate medium of exchange for when people lose faith in their central banks’ promises to protect their currencies.