Global Easing: The Perfect Storm for Gold

The past few weeks have seen a major shake-up in the global economy, as central banks from around the world have taken aggressive actions to try and boost their respective nations. Of course, investors everywhere have been rejoicing as not only have major benchmarks charged forward, but excessive money printing and easing on a mass scale makes a number of assets extremely attractive. One of the best investments to make during a time of currency debasement is gold, as this precious metal has long been one of the most popular safe havens and store of value [for more gold news and analysis subscribe to our free newsletter].

It all started with Mario Draghi and the EU who announced a bond-buying program that could technically feature unlimited bond purchases of three year maturities of those nations who are swallowed by debt. Some of those countries include Spain, Greece, Italy, and Portugal, but there are still others in the EU who are having trouble. Next came Big Ben Bernanke and the Fed who announced an extremely aggressive open-ended QE of $40 billion per month until they see fit. That could mean years of continual money printing and a falling greenback. Both of these events sparked a lot of interest in gold, but another nation has thrown its hat into the ring, creating a perfect storm for this yellow commodity.

Japan will try yet again to fix an economy that has been broken for the better part of two decades, as deflation wreaked havoc on what was once one of the most prosperous nations in the world. The Bank of Japan went all in this week as it announced a jump in its asset-purchasing program of about 10 trillion yen. With yet another major economy printing money at will, it seems that gold is slated to make a strong run higher, as some of the most powerful currencies around the world will inevitably lose value given the massive dilution of the money supply [see also How to Play $10,000 Gold].

Below, we outline three ways to take advantage of gold’s perfect storm.

  • SPDR Gold Trust (GLD): The second largest ETF in the world is always an obvious choice, as this physically-backed fund is easily among the most popular funds in the world.
  • 2x Gold Bull/S&P 500 Bear (FSG): This product goes long gold futures with a 200% leverage while shorting the S&P 500. If you are of the mindset that all of this easing will eventually cripple stock markets and help gold, this may be the perfect play for you. Note that if the S&P continues to perform well, FSG will struggle [see also Marc Faber Warns: Store Your Gold Overseas].
  • 3x Long Gold ETN (UGLD): If you really want to lever up your bet, go with UGLD, as it offers 300% leverage on gold futures contracts. Of course this fund will be extremely dangerous so it is best left to active traders who fully appreciate the risks of the product.

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Disclosure: No positions at time of writing.

This entry was posted in Actionable Ideas, Asset Allocation, Commodity ETFs, Gold, Precious Metals and tagged , , . Bookmark the permalink.

Commodity HQ is not an investment advisor, and any content published by Commodity HQ does not constitute individual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities or investment assets. Read the full disclaimer here.

8 Responses to “Global Easing: The Perfect Storm for Gold”

  1. [...] Global easing programs from around the world have investors scrambling back and forth. Some are excited to see stock markets have such positive reactions, while others are ripping the Fed for what they feel will be our undoing. Either way you spin it, QE3 is here and it may be staying for quite a while. Ben Bernanke announced that this round of asset-purchasing will feature $40 billion in MBS per month until they see a material growth in the jobs sector and the economy. What they define as a significant growth isn’t clear, so many are predicting for this spending spree to continue on for quite some time [for more economic news and analysis subscribe to our free newsletter]. [...]

  2. [...] Global easing programs from around the world have investors scrambling back and forth. Some are excited to see stock markets have such positive reactions, while others are ripping the Fed for what they feel will be our undoing. Either way you spin it, QE3 is here and it may be staying for quite a while. Ben Bernanke announced that this round of asset-purchasing will feature $40 billion in MBS per month until they see a material growth in the jobs sector and the economy. What they define as a significant growth isn’t clear, so many are predicting for this spending spree to continue on for quite some time [for more economic news and analysis subscribe to our free newsletter]. [...]

  3. [...] the end of September, 2012 has by and large been another solid year for commodities. Measuring commodity performance can be a little tricky though, as many commodity [...]

  4. [...] the end of September, 2012 has by and large been another solid year for commodities. Measuring commodity performance can be a little tricky though, as many commodity [...]

  5. [...] Global easing programs around the world have greatly shifted the economic outlook by a number of industry experts. For as long as Bernanke and Draghi continue to print money, along with several other big banks, the future will be relatively unpredictable. Some expect a massive fallout once the cash injection into the economy is pulled, while others argue that QE saved us the first time around and it will certainly save us again. At the forefront of all of these talks has been the precious metals sector with a particular interest in gold [for more gold news and analysis subscribe to our free newsletter]. [...]

  6. [...] Global easing programs around the world have greatly shifted the economic outlook by a number of industry experts. For as long as Bernanke and Draghi continue to print money, along with several other big banks, the future will be relatively unpredictable. Some expect a massive fallout once the cash injection into the economy is pulled, while others argue that QE saved us the first time around and it will certainly save us again. At the forefront of all of these talks has been the precious metals sector with a particular interest in gold [for more gold news and analysis subscribe to our free newsletter]. [...]

  7. [...] metals have become increasingly popular in recent years, as continued easing from central banksaround the world and escalating fear over the global economy has led to a massive inflow for these [...]

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