Bernanke boosts gold, silver

As investors look to the Fed chairman for direction, the immediate one is upward price momentum.

By Wall St. Cheat Sheet Mar 27, 2012 10:50AM

On Monday, Federal Reserve Chairman Ben Bernanke delivered a speech at the National Association for Business Economics spring conference in Virginia that ignited financial markets.


Bernanke noted some positive signs in the job market but remained cautious about the future. Once again, he signaled the Fed may need to provide more easing to stimulate growth and reduce long-term unemployment. As a result, gold prices jumped nearly $20 an ounce, while silver gained more than 50 cents an ounce.


Post continues below.


Bernanke explained the better employment numbers were somewhat out of place with the overall speed of economic expansion. Even though the unemployment rate has been declining in previous months and currently stands at 8.3%, it is still well above pre-crisis levels.


"After nearly two years of job gains, private payroll employment remains more than 5 million jobs below its previous peak; the jobs shortfall is even larger, of course, when increases in the size of the labor force are taken into account. And the unemployment rate in February was still roughly 3 percentage points above its average over the 20 years preceding the recession. Moreover, a significant portion of the improvement in the labor market has reflected a decline in layoffs rather than an increase in hiring," Bernanke said.

 

He added, "The number of people working and total hours worked are still significantly below pre-crisis peaks, while the unemployment rate remains well above what most economists judge to be its long-run sustainable level."


Bernanke's recent statements about high unemployment suggest that the central bank is prepared to keep interest rates near zero until at least late 2014. When inflation is factored in, ultra low interest rates translate into negative real rates, an environment that is bullish for hard assets such as gold and silver.

 

Earlier this month, in the Federal Open Market Committee meeting, the Federal Reserve did not announce any changes in its monetary policy. Many blamed this as the reason for the recent pullback in gold and silver. Over the past couple weeks, gold prices fell from $1,700 per ounce to $1,630 per ounce, while silver declined from $33.75 per ounce to $31.50 per ounce.


However, the big picture for precious metals has not changed. The economy is still struggling and the Federal Reserve is willing to use the printing press to kick the can down the road until it falls off a cliff. According to the latest financial statement released last week, the Federal Reserve's balance sheet surged 20% to $2.9 trillion in 2011. U.S. Treasury holdings grew 64% to $1.75 trillion, accounting for the majority of the balance sheet.

 

Since Bernanke believes cyclical rather than structural factors are the primary source of long-term unemployment, he expects stimulus to counter the weak job market. However, he also leaves room for his hypothesis to be wrong. In this case, he still believes the Fed can support employment and growth levels through ongoing accommodating policies.


"If this hypothesis is wrong and structural factors are in fact explaining much of the increase in long-term unemployment, then the scope for counter-cyclical policies to address this problem will be more limited. Even if that proves to be the case, however, we should not conclude that nothing can be done," Bernanke explained.

 

Eric McWhinnie is an editor at Wall St. Cheat Sheet. As of this writing, he is Long EXK, AG, HL, PHYS.

 

Related

Tags: GLDSLV
16Comments
avatar
pretty much Bernanke is clueless as to how to save this economy and by throwing trillions at the super rich he has made it worse 

We are so doomed.
Mar 27, 2012 1:09PM
avatar
We are in this situation because we have too many voters that vote for a living and not enough that work for a living. No ambition, no pride and no common sense describes the majority.
Mar 27, 2012 1:11PM
avatar
All so-called American car makers have and are building factories over seas, along with most major "American Companies" such as GE, IBM, etc..  They are businesses.  Not your mother.  This situation will not change until the government realizes that the American corporate tax structure is driving work out of the country.  Make it attractive and US companies will grow here.  Make it a financial hardship, and they will leave, as any good business man will tell you.  
When you have to compete against foreign companies, you have to do things in a business like fashion.  Only a fool thinks that a company should stay here and give you a job because it is the American Way.  Level the playing field and they will some and stay and grow.
Mar 27, 2012 2:59PM
avatar

Saph500,

 

You DO realize that our deficit last year was about 15 TIMES as large as the numbers who quoted as the costs of the wars, right?  While I agree with you on these wars being a waste, our wasted money goes WELL beyond these silly wars.   We spend about 40% more each year than we bring-in in taxes.  BUT, if we taxed EVERY DOLLAR of cash on-hand at every business in America, we would still be FAR short of our almost $16 Trillion national debt.

 

At the end of WWI the richest man in America could have EASILY paid off our national debt out of his personal checking account.  Today, Warren Buffett and Bill Gates do not have enough money or assets to pay the interest ONLY on our national debt for even 4 months.  The answer is obvious... it's not that we tax too little, the problem is that our government spends FAR too much! 

 

We all need to stop this insanity and demand financial responsinbilty!  But, the sad reality is that 48% of our population is now addicted to government handouts and the vast majority of our population live beyond their means and are mathmatically and financially illiterate.  Parents need to teach our kids about money, as we sure can't trust teachers to do the job.

Mar 27, 2012 2:48PM
avatar

"After nearly two years of job gains, private payroll employment remains more than 5 million jobs below its previous peak; the jobs shortfall is even larger, of course, when increases in the size of the labor force are taken into account. And the unemployment rate in February was still roughly 3 percentage points above its average over the 20 years preceding the recession. Moreover, a significant portion of the improvement in the labor market has reflected a decline in layoffs rather than an increase in hiring," Bernanke said.

 

EVERY TIME President Obama and his surrogates tell us how great the labor market is today, we all need to remind him of this quote!  There are still more than 5 million less people employed in the private sector today than 4 years ago... and this is in spite of our nation now having about 7 million more people in it today than just 4 years ago.  IF the unemployment rate was equal to 2008 there would be about 8,000,000 more jobs today.  BUT, the reality is that millions of people have given up, their benefits have run out, and they are no longer classified as unemployed.  Our real rate of unemployment and underemployment has not been this bad since the Great Depression.  Is this the hope and change we want?

Mar 27, 2012 2:42PM
avatar
Don't forget that the unemployment rate does not reflect the people not looking for a job now.  Does Bernanke even understand why employment rate is not reflecting the economy?  It is simple.  obama, pelosi, reid, and the democrats.  All the new regulations, possible taxes, healthcare reform.  This group of democrats are the worst people we have to promote business.  You cannot keep villifiying and penalizing these businesses and expect them to hire.
Mar 27, 2012 12:43PM
avatar

As long as we rely on a debt based economic system - we are doomed.  The entire economy relies on borrowing.  The fractional reserve system is so very flawed it is crushing the life out of most Americans. We need an entirely new economic model to examine.  We need to take Ron Paul's ideas on The Fed more seriously.  No one else in Congress is even using a fraction of their brains.

Mar 27, 2012 1:03PM
avatar
So what will you buy? Did Ford shut down a factory here and build one in India to take its place? No. I have purchased 3 new Fords, all built in the USA. You send your message by buying made in the USA. Not by turning your back on the products still made here. To my knowledge there are no cars sold here that are made in India. Have you seen the cars they sell in India? They are tiny. Ford doesn't build cars here that would sell in India. Every car company has foreign factories.
Mar 27, 2012 2:07PM
avatar
American car companies Ford, GM and Chrysler has invested more money in this country than most people even have a clue ! Ben with his zero int policy is killing the value of the US dollar He is printing money just to inflate the stock market ! And is doing nothing but pumping the price of oil and food seeing that everything is sold in US dollars on the markets ! The US car companies are the only ones hiring by the thousands ! Socialized wall street is a joke ! A house of cards waiting to fall ! QE3 will do nothing but devalue the dollar more and inflate stocks ! That's it ! BTW Tax breaks ? LOL We have had tax cut after tax cuts across this country for over 10 yrs in most cases and GUESS WHAT ? Tax breaks do not create jobs ! Consumers do !! If they did IDIOTS we would have 2% unemployment by now !! After a decade of tax cuts they truly do not work ! And its not soc sec bankrupting this country ! Its two unpaid for wars for OVER 10 yrs Thats unpaid for, and tax cuts draining the US treasury ! At the cost of 2 billion a week! We have fools on this board and it shows!
Mar 27, 2012 12:12PM
avatar

I find it interesting that this type of news is more significant to the shape of our economy than the healthcare discussion (which is important), yet there are only three comments on here, and one of them is clearly spam. Wake UP America!

Mar 27, 2012 12:41PM
avatar

Your thesis can be pointed out as flawed just by examing the events of last fall. Silver prices unwound dropping quickly when hedge and mutual funds had to raise cash for redemptions due to falling stock prices and end of year selling. This can happen regardless of the latest pronunciations of the grand pubah of the Fed !

       This article, like other financial tips the media likes to dole out (watching what Buffet does), is meaningless and can be damaging to the small investors portfolio. Like mainstream media political reporting it is interesting filler. Just don't make the mistake of acting on it!

    It is often flat wrong, a narrative with an agenda, and the best advice would be to do the opposite of what is recommended. Just sayin'.

Mar 27, 2012 6:55PM
avatar
this is all about the gold and silver prices, snap out of it, price of gold is not determined by unemployment rates.  be ready to sell if you havn't already. when the 401 and the little man is fully vested this tree is going to be shook
Mar 27, 2012 2:39PM
avatar
Unions make up only 7% of the US workforce ! LOL What about the other 93% LOL Some people better stop with the republican mantra ? It truly don't work ! Team USA ? Thats a joke The Japanese sunk 90% of the Pacific fleet in 1941 and today i cannot turn a corner without seeing a Toyota or a honda! 9/11 ? It was bad but the knee jerk reaction did not have to cost 5 trillion dollars to date! And lets not forget the broken kids  and families from these wars that will cost another trillion dollars over the next 25-30 yrs! So lets not wrap ourselfs in the American flag . Americans are self centerd people to start with ! Land of the free? Home of the stupid! Thats the USA baby . Love it or leave it !!!!!!!!
Mar 27, 2012 2:04PM
avatar
Taxes are driving business away, but so are the US workers. Labor unions protect the sub par workers way too much. Many Americans want great salaries and benefits but also don't want to work hard for it. A large company is out to do one thing, make a profit. We need as individuals to realize we are all part of  "Team USA" either you contribute to the team or your a player that handicaps your team. "We the people" are contributing to bringing this country down, can't just sit there and point fingers at individuals in Washington.
Mar 27, 2012 12:50PM
avatar
I hope the below posting for FORD CORP, gets AMERICANS THINKING,about why this country is in the situation it is in !!!!!!!!!!!!!!!!!!!
Mar 27, 2012 12:46PM
avatar
If you want the economy to turn around why doesn't FORD corp. OPEN a NEW factory in the USA, instead of INDIA? This is why the economy is SO, SO, BAD in this the USA, due to AMERICANS companies MESS it up. When they have a chance to put WORKERS back in jobs, they rather send them to overseas countries  & let workers over there work for CHEAPER WAGES,  & what do we get out of this higher unemployment & products that to me are sub standard. KEEP the JOBS & WORKERS in the USA & NOT over seas. This lastest news release that FORD CORP. was going to open NEW factorty in INDIA, really is a  SLAP in the face to AMERICA'S WORERS. I've have owned a FORD product in the past when they were made in the USA, but NOW I, WILL NEVER even consider buying a FORD product & the ONLY way to show this to FORD corp that we AMERICAN CITIZENS care is to NOT BUY FORD PRODUCTS  
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

124
124 rated 1
282
282 rated 2
455
455 rated 3
624
624 rated 4
642
642 rated 5
665
665 rated 6
610
610 rated 7
460
460 rated 8
287
287 rated 9
167
167 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
KOGKODIAK OIL & GAS Corp10
TWXTIME WARNER Inc10
BBBYBED BATH & BEYOND INC10
FOXATWENTY-FIRST CENTURY FOX Inc CLASS A10
COPCONOCOPHILLIPS9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.