Should You Be Buying More Gold Ahead of the ECB’s Printing Decision?

From our recent reader survey, I see our readers are not that concerned about what happens in the eurozone. But there’s a phenomenon occurring there that I believe every investor who is interested in gold bullion should be aware of.

Let me explain…

It’s a known fact that when central banks print more of their paper money, it’s usually bullish for the yellow metal. We saw this after 2009, when the Federal Reserve started to print more paper money; gold bullion prices skyrocketed.

In the eurozone, there continues to be major economic problems in the region. Italy, the third-biggest economic hub in the eurozone, has reported its unemployment rate hit 13% in February—the highest unemployment rate ever recorded in the country. (Source: Reuters, April 1, 2014.)

To help countries like Italy, Greece, Spain, and Portugal with their economic woes, the European Central Bank (ECB) has lowered its benchmark interest rate—but that hasn’t spurred bank lending as bad debts on the books of major eurozone banks keep piling up. Even once-strong eurozone countries like France are under economic scrutiny.

Now, as no surprise, the ECB has started talk about following the same route the Federal Reserve has taken—printing paper money.

At a conference last week, one of the ECB’s Executive Board members, Yves Mersch, said the ECB is ready to turn on its printing presses. The president of the ECB, Mario Draghi, has also said quantitative easing in the region may be needed if inflation in the eurozone continues to remain subdued. (Source: Reuters, April 7, 2014.)

Hence, to the printing presses of the Federal Reserve, the Central Bank of Japan and other world central banks that are printing more of their paper money, we may have the ECB joining the paper money printing party.

Since the beginning of 2014, the price of gold bullion has gone up. The exact score card: Gold bullion has risen 7.6% since the beginning of the year, while the Dow Jones Industrial Average has fallen 3.5%.

If the ECB starts printing paper money, I believe we will see gold bullion prices spike. As I have been writing for months, the recent pullback in gold bullion prices has presented investors with an opportunity to buy more gold-related investments at depressed prices.

I’m predicting that in the months and years ahead, gold at $1,200 or $1,300 an ounce will be looked back on as a bargain.

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