The Federal Reserve's third round of quantitative easing will
certainly ignite inflation, sending gold and silver prices
higher, say ETF investing advisers. They overwhelmingly favored
bullion and miner ETFs when asked last week for their best
commodity investing idea for the fourth quarter.
Brett Manning, market analyst at Briefing.com in
SPDR Gold Shares (
) is poised to outperform as the Federal Reserve has pledged to
print money indefinitely. The basis for this is pretty simple: A
lot of people were really excited about gold a year ago. Then
this market endured a year-long correction filled with a lot of
short-duration, large-percentage sell-offs that worked to shake
out all the loose hands.
As this correction progressed, the world largely began to
doubt the Fed's willingness to print more money in the face of
moderate growth. That all changed on Sept. 13, when (Fed
Chairman) Ben Bernanke announced that the Fed would move back in
and start indefinitely expanding its balance sheet for the
The scramble back into gold has already begun, but it should
have quite a bit further to go, given how effective the
correction period was in reshaping market sentiment toward apathy
or bearishness from the exuberance of August 2011.
What QE1 (quantitative easing) and QE2 did for gold should
actually be amplified this time around if we are to take Bernanke
at his word that, this time, they will continue flooding in
excessive liquidity even after they are seeing signs of strong
In any case, the long-term trend for gold is up. And, provided
the Fed doesn't run into any mechanical obstacles in
implementation, then the only real danger to gold bulls here
would be a very rapid acceleration in job growth for the U.S. on
the near horizon.
Given the uncertainty posed by the upcoming elections, the
potential for a sharp drop in government spending, and the
decelerating demand figures showing up in the corporate sector,
the odds suggest one is safe for the time being from such an
evolution of context.
But one is urged to avoid "trading" gold, which is a
notoriously difficult task at any time. At this point, a lot of
short-term capital is likely piling in on every breakout that
comes along because the case for immediate appreciation is so
easy to make, as I have done here. But that type of trader
consensus makes the road bumpier, not smoother.
Jay Pasch, independent trader and co-founder of
www.jtrader.us in Minneapolis:
We are pure technicians and statisticians and do almost no
fundamental work. The Comex gold-futures contract remains on a
tear after breaking away from a 12-week double-bottom chart
pattern on Aug. 21. Over the past month, the 143-point breakout
move has driven the gold contract up nearly 9% as of the Sept. 18
close at $1,771.20. (It was trading at $1,780.30 midday
This dramatic break-away move has also triggered the breakout
from a much larger descending-triangle price pattern that
measures to a contract high of $1,942 an ounce, which was set
back on Sept. 9, 2011, or nearly 10% from current levels.
Direxion Daily Gold Miners Bull 3X Shares (
) is one way to play the bullish move currently under way in
gold. We prefer the triple leverage because, if we are right, the
profit potential is greater.
NUGT broke out of a bullish, double-bottom chart pattern, when
it cleared 14.41. The double-bottom projects a price target of
21.10. Looking further out on NUGT's weekly chart, however, there
is no real price resistance until the 27 area, a target that we
think is entirely achievable by the close of 2012.
Adam Koos, president of Libertas Wealth Management Group
in Columbus, Ohio, with $48 million in AUM:
More economic stimulus from the Federal Reserve was a matter
of when -- not if -- because of high unemployment and
underemployment. The Fed has tried QE1, QE2, Operation Twist 1,
Operation Twist 2, and each time, the markets experienced a short
burst. The Fed seems married to the philosophy of Keynesian
economics. To not implement another round of stimulus would've
shown it's given up on its strategy.
While I did not see "open ended" QE as a possibility until
European Central Bank President Mario Draghi announced the ECB's
plan, "QE Infinity" made total sense from a psychological
standpoint. It makes sense for the Fed to just print money
indefinitely until it works.
Of course, what if it doesn't work? It's all but guaranteed
that increasing the money supply will eventually create an
inflation problem. What QE Infinity brings to the table is a
potentially new stock market bubble as well. The market gets
flooded with zero-interest dollars. Institutions will speculate
with the money to get a better return, thus artificially pushing
these markets higher until a big, overly inflated bubble pops.
Add that to inflation and the picture gets pretty ugly.
I like commodities and commodity stocks because they partially
act as inflation hedges. Historically, when the U.S. is in a
low-and-rising interest-rate environment, commodities have been
the best performing assets.
I'm not positive thatiShares Silver Trust (
) will offer more growth over GLD. But the probabilities are in
silver's favor because the market has been in favor of gold for
some time. If you superimpose a gold and silver chart on top of
one another, you'll see silver hasn't grown as fast as gold on a
percentage basis. Silver should have more room to run to play
catch-up with gold.
I would also recommendGlobal X Silver Miners ETF (
) andMarket Vectors Gold Miners ETF (
). I'm waiting for them to pull back to open a position because
both are pretty overbought right now.
Jonathan Citrin, CEO, and Viktoria Palushaj, market
analyst, of Critrin Group in Birmingham, Mich. with $55 million
Our firm sees a wide disparity between market returns and
economic fundamentals. The market, which is typically known as a
leading indicator, has seemingly become a misleading indicator.
Despite domestic equity market performance being quite strong and
the apparent willingness of global world bankers to keep major
indices increasing, poor economic fundamentals do not support the
In the fourth quarter, the major markets should revert to the
mean, declining globally, particularly in the U.S. Markets will
not be pleased with economic data reported early in the coming
quarter, including lackluster employment gains and
slower-than-necessary gross domestic product growth.
We are positioned defensively and expect alternatives such as
GLD,United States Brent Oil (BNO) and iPathS&P GSCI Crude Oil
ETN (OIL) to outperform. A possible pickup in European
consumption mixed with unrest in the Middle East could make oil
prices rebound after falling recently. True production could be
increased to mitigate price pressures, but not enough to keep up
with global demand if international economies, especially Europe,
finally find their stride.
Oil is volatile. But it has the potential for considerable
gains and is a hedge against more turbulence among the world's