In my previous article (What if the Fed Really Tapers QE?) I focused on what would be the likely outcome of limiting the QE program on several key markets (gold, real estate, stocks and bonds). Today, we will provide you with an analogous analysis for a completely different scenario.

In the following part of the article we will discuss what’s likely to happen if the Fed simply continues the QE program and informs about it in a direct way.

In short, you will find details in the table below – the above scenario is listed as #1 in the table below (last week’s analysis focused on scenario #4).

The first case seems most probable based on the recent minutes (from 30th-31st of July; the minutes were published on the 21st of August). The Fed is likely to continue the programs, and communicate the message openly without any misinformation. Such scenario is indeed the likeliest one since despite negligible positive signs the economy has not improved sufficiently. The decision will put upward pressure on real estate, since holding on to Mortgage Backed Securities by the Fed should keep up the boost (however inefficient it may be).

In this scenario, the banking system will be covered from liquidity problems, and indirect subsidies to the banking system will be continued. The stock market should therefore grow. What happens to Treasuries? It depends mostly on inflationary expectations. In the short run we should say that Treasuries would gain because one of the main buyers, the Fed, would keep them. Nevertheless, there is a possibility that they will lose value if the market expects this type of policy to lead to inflation. In this case, the Treasuries could go down. However, possibly the Fed would step in again with some other tool to counter that (such as with the “operation twist”). There are limits to such steps, of course. However, as we mentioned last time, we do not see very high inflation on the horizon. So far…

Gold should be on its upward track within a few months (if not sooner), because upon the continuation of the intervention it will probably be considered a good dollar alternative, an anti-system hedge with the proper backup in the physical market.

Summing up, if the Fed continues the QE program and it is communicated directly, gold is likely to move higher within a few months. The full version of this report includes our analysis of 8 different scenarios (as you can see on the above table). We recommend that you stay prepared almost no matter what the Fed does by reading the entire Market Overview report. You can sign up here. 

Thank you.

Matt Machaj, PhD

Sunshine Profits‘ Market Overview Editor

Gold Market Overview at SunshineProfits.com

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Disclaimer

All essays, research and information found above represent analyses and opinions of Matt Machaj, PhD and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matt Machaj, PhD and his associates do not guarantee the accuracy or thoroughness of the data or information

Fed, LBMA, Comex & Banks On The Edge Of Disaster

London metals trader Andrew Maguire, who broke the news to King World News about two courageous JP Morgan  whistleblowers confessing that JPM manipulates the gold and silver markets, warned KWN that the Fed, LBMA, Comex, and the bullion banks are now on the edge of disaster.  He also told KWN exactly where massive central bank buying will come into the gold market.  Below is what Maguire had to say in this powerful interview.

Maguire:  “The downside for the central banks is that short-term interventions have further emptied the physical vaults (once) again.  And where is this gold coming from?  It’s coming out of unallocated bullion bank inventories (at the Comex).  The central banks may be leasing out gold, but it’s not leaving their vaults (at this time)….

……read more HERE

Incredible Events Now Unfolding In The Gold & Silver Markets

U.S. Stock Market – I continue to look for the economy to roll over and whatever “tapering” occurs to be lessen, then halted; then eventually a new “easing” as the economy and jobs slip further than Obama’s popularity. But until the easing and perception that the FED is now “behind” the curve, the stock market is not likely to fall sharply.

U.S. Bonds – Avoid!

Gold – Once again selling large quantities at the worst possible time is taking place, which strongly suggesting the agenda we seen earlier this year is not complete. One of the obvious goals is to demoralize the sentiment. It’s working as I’m fed up with all the manipulation and horrific media response to it. Need to get back above $1,350 fairly soon or the rest of 2013 shall likely be shot.

U.S. Dollar – How long will it remain like kissing your sister? Your guess is as good as mine.

Mining and Exploration Shares – While the price movement of gold shall have a direct impact on the mining shares, the further one goes down the food chain in the juniors, the darker the outlook becomes. I’ve said it for many, many months now and sadly it continues to play out – the junior resource market is on life-support and at best, it shall be 2014 before we see any sustained lift – if at all.

I can assure you this belief of mine doesn’t help business or my own portfolio but in all cases – the truth shall always set you free.