Rumors are echoing in the corridors of power in Wall Street and Washington — whispers about Fed Chairman Ben Bernanke's secret plan for interest rates.
Last month, the Fed pledged to keep the benchmark rate near zero until at least mid-2013. Now, the rumor is that "Helicopter Ben" is seeking to force down longer-maturity bond yields — in a last-ditch attempt to boost the economy.
Now, rumors are that the Fed will use its Open Market Committee meeting on September 20 and 21 to replace short-term Treasury securities in its portfolio with long-term bonds in a bid to lower rates on everything from mortgages to car loans.
Plus, Bernanke himself told an economic conference in Jackson Hole, Wyoming, on August 26 that the Fed has "a range of tools that could be used to provide additional monetary stimulus."
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And last Wednesday, Federal Reserve Bank of Chicago President Charles Evans urged the Fed to consider adding "very significant amounts of policy accommodation" and attacked the notion it should abide by a 2 percent ceiling on inflation.
Plain English translation: Kick the money printing presses into overdrive boys! Damn the torpedoes! Full speed ahead!
Mark my words: The gold market, which is already hotter than hell's kitchen, could reach critical mass!
Why? Five Important Reasons!
1. The lower rates Bernanke is trying to create fuel fears of higher inflation — so gold is bought as a hedge against inflation.
2. Lower returns on Treasuries drive investors into riskier assets in search of a higher return. This can boost equities and most commodities — including gold.
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3. Lower returns on Treasuries reduce demand for U.S. dollars, causing the dollar to fall. Since gold is priced in dollars, gold usually rises when the dollar falls.
4. Looser monetary policy implies that the economic situation is not as rosy as many would like to believe, so investors buy gold as a safe haven asset.
5. And finally, kicking the money-printing presses into overdrive is a major reason why gold has already exploded 541% higher — from $300 per ounce to as high as $1,923 — and it's why I see MUCH higher gold prices in the near future!
Result: Investors who have never even thought about owning gold before will rush into the metal.