Traders' Corner: Quantitative Easing and Gold Stocks
One of the buzzwords that you will be hearing in the near future on all of the financial networks will be Quantitative Easing. In the late 1990's and early 2000s the Bank of Japan cut rates to near 0 and flooded the banks with excess liquidity to stave off a deflationary event. A lot of people believe that this is the only course of action that is left for the US Federal Reserve. Ben Bernanke's most famous article, which can be found here:
http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.h...
talks about what he would do if he were Fed Chief and the US were to go through a period of deflation. I will let you read the article and come to your own conclusion on whether or not he would consider quantitative Easing as a viable solution to the credit crunch we are now experiencing in the US. If this is the path that we as a country are about to embark upon then a logical beneficiary would be gold and gold stocks. Looking at a chart of GDX, which is made up of mainly gold stocks, we get a sense that some kind of intermediate term bottom is forming which could be a clue as to the intentions of the Federal Reserve and the US Government.
Trade Safe!
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