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This Week Two Most Important Decisions – Await
There are two important current events coming up on September 12 & 13. They are creating a huge amount of underlying pressure on gold and silver. Which would be released to the upside, should both these important events become reality. This is the current news markets and investors have been waiting for. Gold and silver have been reacting very positively the past few weeks on news coming out of the EU involving more bond purchases and last week’s Fed Jackson Hole meeting along with terrible news from the recent US jobs report.
On September 12
There is the German Constitutional Court’s decision to back the proposed ESM or European Stability Mechanism. The final ruling is supposed to be announced on Wednesday. If the ESM passes (many in High German government oppose it) and if the total power is handed over to the ECB thus bypassing Brussels to allow the ESM to become a banking institution the ECB will be free to print as many euro’s as then need or want with no one standing by the printing presses to push the stop button.
Should on the other hand the ESM fail to pass through the courts, the needed bond purchases to shore up or bail out the failing economies of the PIIGS nations in particular, by the ECB would be stopped dead in its tracks. If this occurs (it is highly believed the ESM will pass) the economies of the PIIGS nations could crumble within weeks, if not days.
The Bait & Switch… Oh yeah, there is one!
The latter being said, it appears Mario Draghi all along has had a contingency plan up his sleeve that many people have not been aware of in the event the ESM’s passage fails to come to light. The same day that the ECB had announced the bond purchasing program a much less publicized press release was released by the ECB that said:
“The Governing Council of the ECB has decided to suspend the application of the minimum credit rating threshold in the collateral eligibility requirements for the purposes of the Eurosystem’s credit operations in the case of marketable debt instruments issued or guaranteed by the central government, and credit claims granted to or guaranteed by the central government, of countries that are eligible for Outright Monetary Transactions or are under an EU-IMF programme and comply with the attached conditionality as assessed by the Governing Council”.
The suspension is related to any outstanding or new assets that are described above. This will essentially take away any credit rating downgrades when a country signs up into the program. Furthermore, it suggests that any bank inside a country connected to this program could use self-issued government guaranteed debt as collateral.
In essence this would be seen as additional support as well as a promise of liquidity for the country entering the program, a bump onto the Spanish banking system that has already formulated considerable amounts of collateral by lending to local governments. This is very important and note worthy because basically it allows the creation of a backdoor in which huge amounts of ECB monetization of Eurozone sovereign debt could take place. It appears Draghi is the Houdini of central banking magic.
On September 13
Markets and investors alike are also waiting for the conclusion of the next FOMC meeting. Fed Chairman Bernanke is expected to announce on Thursday afternoon the next round of QE. This is a critical decision in which once the Fed finally initiates QE for the third time, it’s likely to continue onto infinity. Regardless of any new names they call it, whether or not it is in small stages or just plain QE3 to infinity.
There is a mixed anticipations regarding exactly when QE3 will start. Many believe (a 60 percent chance) Bernanke will delay the start for a couple more months. The majority believes Bernanke’s announcement will yield money printing & bond purchases within weeks if not days. However everyone these days agrees QE is coming, it’s just a matter of when.
More Quantitative Easing will only add to the nation’s money supply which will create higher inflation. This is of course good news for all us gold & silver bugs. We have been seeing the hand writing on the walls for a long time coming. The thing that the Federal Reserve continually attempts to do is control expectations. The Fed puts more emphasis on the belief that inflation is not created due to how much currency is in circulation, nor how quickly its quantity grows. They base everything upon how people think, and if the people believe inflation will worsen.
Currently were seeing people start to fear, they are losing faith in both the central bankers and political leaders to insure fiscal stability. This is also playing a big part in a current rush into gold and silver. People are starting to realize that the future of the current monetary system is collapsing.
The 3 Stages Of A Bull Market
First stage is the silent stage where almost no one takes much notice and only the few informed take part thus getting in at the best buying opportunity. The first stage is also the longest period of the bull cycle.
Second stage is where markets will start to catch on when higher levels of participation occurs, more people get informed via alternative media etc, but yet the general population is still totally in the dark because mainstream media is either not covering events or negatively covering them. The second stage is the next longest stage of a bull cycle.
Third stage is when mainstream media is covering everything on the events, the public at large becomes informed and massive buying occurs in a short period of time. The third stage is always the shortest stage of a bull cycle and marks the beginning of the end.
Those investors entering a bull market during its final (third) stage always pay premium prices and receive little to no upside gains.
Gold started onto the second stage of its bull run once its price broke above $1000.00 Silver is still in its first stage of the Bull Run in precious metals. Silver will be entering into the second stage most likely later on during the last part of 2012. The marker for silver entering into the next stage is when the price of silver exceeds $50.00 per ounce.
So while we are seeing an escalation in market prices don’t be fooled into thinking you’re too late to participate. There is still time if you react now to see a huge upside potential come into your favor. Buy gold and silver today while they both are still highly undervalued so you will come out on top.
Tom Genot –
2012-09-11 23:13:46
Source: http://coinbullion.net/2012/09/this-week-two-most-important-decisions-await/
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