Tuesday, May 11, 2010

Gold At Record Highs

In response to the Federal Reserve's swap arrangement back in place with the European Central Bank, the precious metals markets have seen an explosion upward bringing gold back in range of the all time record highs.

The swap arrangement in simple terms means that the Federal Reserve will be printing an enormous amount of paper currency and sending it to the European Central Bank.  The ECB in return will send back euro's.  They do this because dollars are needed overseas for banking transactions when there is stress in the system.  There are estimates that this new swap arrangement could increase the balance sheet of the Federal Reserve by $500 billion or more. (Massive money printing)

This week in the NY Post they discussed how JP Morgan is now officially being investigated for manipulation in the precious metals markets; specifically silver.  With the spotlight now on the firm it will be far more difficult for them to artificially suppress the price downward.

With their artificial shorts out of the market, it could bring fireworks to the silver market as we move forward.

That being said, the Daily Investor Sentiment survey as of Monday night read 95% bullish for the gold market.  This type of extreme reading usually means a pull back is close.

Any pull back at this point in the metals markets is truly a gift and should be looked at as a tremendous opportunity to add to positions.

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