Here Is The Summer Catalyst Which Will Launch Gold Higher

Today the FOMC minutes came out for June.  The gold price bounced briefly before retreating.  Clearly it scares all market participants if the word ‘tapering’ gets mentioned.  The bottom line is that most Fed members were still in favor of continuing with QE because the job market continues to be weak.

When Bernanke was interviewed about the effects of QE, he was asked why interest rates were going higher?  He responded by saying he ‘was puzzled.’….

Well, to anyone who understands economics, when you print massive amounts of money it always results in higher interest rates over time.  It’s only because of government interference that bonds held up as long as they did.  The bond market had also been resilient for a longer period of time because of the fact that the economy is not really in stagflation or deflation, it’s really in a depression.

So the Fed has to throw incredible amounts of cash at it in order to stimulate anything.  Until recently, interest rates were kept at zero, and yet it hasn’t resulted in a boom in new hiring.  The money has simply fueled another stock market bubble.

In the gold space things have been consolidating, but that should change.  In the past week we have seen key developments in Portugal.  KWN readers may remember that I have been warning that Europe was going to be an important place to watch this summer.  We have now seen many members of the Portuguese government resign because they don’t like the austerity that’s going on.

The bond rates have also shot-up in Portugal, and some of the other PIIG countries are starting to see rates climb in sympathy.  We also saw another extraordinary development:  A huge amount of money was given to Greece because Greece was going to go bankrupt yet again over the course of the next several months.

The Germans intervened with the European Central Bank and contributed a large chunk of cash to Greece to make sure they did not default before the upcoming German elections.  So Angela Merkel is trying to avoid election problems, even though this issue has haunted her all along.  The bottom line is the Germans are not happy with bailing out the southern European countries.  For that matter, neither are the Finnish, Austrians, or any of the northern bloc of countries.”

Barron also added:  “Gold and silver have moved off the lows.  Gold, for example, is still over $50 off its recent lows.  As we move back into the bullish phase of the gold market, gold will continue to climb ‘A wall of worry,’ which is how it has advanced for the past 12 years.

Confidence will only be rebuilt after gold solidly advances back above the $1,600 level.  If there is no faith in the euro over the course of the summer that will only help gold.  Also, continued QE by the Fed will only lead to greater levels of inflation, and at the end of the day that will also be extremely constructive for gold.”