Is the QE Trade Over for Gold and Silver?

Hard Assets Investor made the observation – The QE trade is over, noting that price fluctuations in gold have been disconnected from monetary policy for a while.

As a practical trading matter, Hard Assets Investor is correct. It seems now QE (quantitative easing) impacts the bond, stock and real estate markets but not the gold and silver markets. This is a reversal from the early years of QE when gold and silver soared as a result of QE and real estate was stuck in a rut.

The prevailing trading wisdom seems to be:
-if a handful of doses QE hasn’t created price inflation by now, it won’t ever and hence there is no need to own an inflation hedge like gold or silver; and
-QE only impacts the bond, stock and real estate markets.

The Fed’s decision and guidance this week will be viewed with hope by the stock, bond and real estate markets for signs that the Fed will taper the taper talk and allow those markets to rally.

The Fed can’t be perceived as continuing QE indefinitely lest confidence in the dollar is lost, so they talk taper until it threatens the stock, bond and real estate markets.

While we expect some soothing words that the Fed might cut back a little on its massive bond and mortgage back securities buying program, the Fed will also reassure the markets that it will continue until they hit their inflation and employment targets.

This should boost the stock market and lower bonds yields and if Hard Assets Investor is correct, have no or even a negative impact on gold and silver. Such price action would indicate that the Fed is firmly in control.

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For how long?

Is it too early to hand the Fed its “mission accomplished” banner? Will the real estate market boomlet last?

Will gold and silver reignite?

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