1. A gold short squeeze appears to be in play. In other words, many investors sold gold short in hopes that its price would plunge, but the price of gold has been climbing for several sessions now. So the shorts must cover their trade, meaning they must buy back the gold position they shorted and take a loss, since they now have to buy gold at a higher price

2. An increase in gold demand from China and India has been another catalyst for gold. China's consumption of gold in the first half surged by more than 50%, reinforcing expectations that the nation will overtake India as the world's top gold consumer this year, the China Gold Association said in a statement on its website on Monday.

3. The biggest driver for gold prices, though, is the expectation that the Federal Reserve will keep interest rates at near zero.


In Chicago, most traders think tapering is a "pretty good bet" with rates likely to rise. While the Fed has said it won't raise rates unless employment improves, it's the market, not just the Fed, that actually dictates rates.

If rates rise and Treasury yields fall, people will realize bonds are "not a safe haven play" and will opt to invest in gold instead.


But pointing to a sluggish U.S. job market and an economy void of a visible increased rate of inflation, is ready to rule out tapering














If you believe gold’s going to go up, buy silver

The reason why gold just did an upward spike move of the type not seen since the summer of 2011, when it exploded higher by $20 in seconds, is clear , JPM is now actively buying up gold in the market to meet delivery demands. That, and countless stops getting hit, helps. But the most important factor: Paulson, Soros et al finally got out of the yellow metal. That meant there is only upside as the latent selling overhand is gone. As for silver: why not...

If you believe gold's going to go up, buy silver

This article may gives us some hints

Is This Why Gold Is Spiking





That JPMorgan has been scrambling day after day in the past week to meet gold delivery requests directed to its vault located deep under 1 CMP is no secret, at least not to our frequent readers. This peaked on Monday when, courtesy of a color-coded Comex scheme, we showed how panicked the lateral moves between various Comex gold vaults had become to preserve the illusion of physical availability.



However, as yesterday's Comex report showed, instead of tapering, JPM was just slammed with yet another 70K delivery (registered to eligible warrant detachment), which will likely appear on either today's or tomorrow's settlement. And since the other gold vaults appear to have no more freely transferrable gold to hand over to JPM as everyone is now scrutinizing their every move under a microscope, JPM may no longer have the option of ignoring the mess its vault is in. Which means it has one option: to start buying the metal in the open market.

And sure enough, breaking from the "standard" of the past 8 months, in which JPM was drowning in Issues, for both House and Customer accounts, the firm's House accounts just saw the largest Stop (i.e. taking delivery) since December of 2012, amounting to over 210K oz.

Has JPM, flooded with demands for physical, finally thrown in the towel, and seeing that the deluge in delivery requests is "untapering", had no choice but to turn to the one place it has left to replenish its stocks: the market?

If you believe gold's going to go up, buy silver

You can check on NUBEX and BUYSILVERMALAYSIA. Both offer wide selection of gold silver coins and bars and buyback.

we are finally gaining slight momentum in gold

J.P. Morgan is bullish on gold even after Paulson dumped holdings

JPMorgan Advises To... Buy Gold?
Tyler Durden's pictureSubmitted by Tyler Durden on 08/16/2013

Gold shrugged off news today that Paulson & Co had cut its exchange listed gold exposure in half and rose 2.2% to $1,365/oz. This may be delivering an exclamation mark to define the end of the 10-month, 25% fall in gold and 50% fall in gold equities, (while the S&P advanced 13%).



The World Gold Council reported today that physical gold demand remains strong, questioning the price weakness seen in paper markets. Additionally, gold supplies could be constrained in September if labor strikes are initiated in South Africa. There’s typically some positive seasonality to the gold price in August/September helped by India, which is still the largest single (28%) gold market.



Often this strength correlates with the Denver gold conference. The conference attracts many of the larger gold investors and given the other positives for the metal (and that the depressing effect of the Q2 results is past) we would not be surprised to see a stronger gold price in the run up to the show. We’d encourage shorter-term investors to consider getting long the gold space with a four to five week time horizon. This year the Denver Gold Forum will be from the 22nd to 25th September.



The World Gold Council shows that gold demand remains strong. China and India remain large physical buyers of the metal. We believe this highlights that enthusiasm for the metal remains strong amongst the majority of the world’s population. Indian demand is quite seasonal related to events and festivals. While some might argue for less Indian buying due to tougher regulations and the weaker rupee making the metal more expensive, the WGC data suggests the opposite. Perhaps fear of currency weakness lifts buying.



Paulson &Co’s gold purchases in 2010 put the spotlight on the metal, so it’s encouraging to see that the market was not disillusioned today after it was disclosed that this position was cut in half. Perhaps this news was seen positively because the overhang has been removed. The gold market may also have reacted to lower risk of "tapering”.



South African gold supply could step down in H2. South African wage negotiations have moved into a mediation phase and could move to plans for strikes by as early as next week. While South African production has fallen and it is now only about 5% of mine supply, production could step down again, given the significant wage demands, which could make parts of the industry there uneconomic.

And more importantly, You are Here




If you believe gold's going to go up, buy silver

well, they offer world wide recognise coins and bars. so when zero hour come, you can liquidate them anytime anywhere.

and more importantly, you do not necessary sellback to seller, I am sure there are other channels to sell eg ebay, mudah, facebook etc even on lowyat.

Has anyone ever brought from APMEX? How's the overall experience?

India has a way to increase the gold supply!!!

If it really work this time, there will be enough gold for internal circulation within India border and affect the global gold demand!!!

They are even going to melt down the jewellery!!!Every single piece of scrap gold they can get!!!

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India to launch Save Gold Campaign

The campaign is aiming to activate some of the gold currently lying fallow with individuals, banks, high networth individuals, charitable trusts and even temple trusts.

MUMBAI (MINEWEB) -

India's bullion industry is set to revive its gold deposit scheme in a bid to mobilise gold coins and bars lying idle.

The Save Gold Campaign (Swarna Bachao Abhiyan) is hoped will mop up some of the gold currently lying fallow with individuals, banks, high networth individuals, charitable trusts and even temple trusts, that is estimated to be as much as 25,000 tonness.

An announcement in this regard was made at the tenth anniversary of the India International Gold Convention currently on in Jaipur, the pink city.

The All India Gems and Jewellery Trade Federation held a meeting recently with disparate parties in a bid to tackle India’s growing demand for gold and the resultant widening current account deficit.

Vinod Hayagriv, ex-chairman of the All India Gems and Jewellery Trade Federation said India's apex bank, the RBI, is to frame and regulate the national gold deposit scheme, where eligible jewellers can mobilise gold through eligible banks.

Gold lying idle with corporates, individuals and temples can be unlocked and brought to the market, said DV Ramesh of Bangalore-based The Jewellers Association.

Haresh Soni, chairman of the Federation said the organisation would interact with the finance ministry to discuss the new guidelines.

The new scheme

While consumers would be exhorted to bring in idle gold to authorised jewellers, the jeweller in turn would check the authenticity of bullion or coins and issue a certificate and seal the gold, handing it back to the consumer.

In the case of jewellery, it would be melted down in the presence of the consumer before the certificate is issued.

The consumer would then have to take the sealed gold and authenticity certificate to the bank, which would issue a deposit certificate for a valid period, ranging from one and a half to three years.

After the said period, the depositor would get the gold back with interest as promised by the bank.

Hayagriv added that the campaign would attract over 100 tonnes of gold within a short period.

There are also talks to lend the idle gold to a non banking financial company (NBFC), which would be exclusively set up for the purpose. The NBFC would allow investors to withdraw the gold before the maturity period, and would lend the gold to jewellers.

The only drawback, as of now, that was made evident at the Jaipur conference was that investors would need to offer a minimum of 100 grams either of gold bars or coins to be eligible. Institutions would need to bring in at least 1 kilo gold.

"India’s increasing reliance on gold imports contrasts sharply with gold global supply which has remained largely static. When we look at the total Indian accumulation of gold [over time], it amounts to about 10% of world gold, amounting to around 18,000 to 19,000 tonnes. This is not taking into account the significant amount of scrap gold in the country,'' said Hayagriv.

Old Scheme

With the objective of bringing the privately held stock of gold into circulation, and reducing the country’s reliance on gold imports, the Indian government had rolled out a Gold Deposit Scheme through the State Bank of India in 1999. However, given the weak response, the scheme was withdrawn and re-launched with modifications in 2009.

However, leading public sector banks in India which launched the scheme did not promote it aggressively, ``as it was done as a government induced exercise.''

Moreover, the lack of facilities to melt the jewellery, test the purity of gold and convert it into bars proved to be a major hurdle. Banks incurred heavy expenditure to melt and convert the jewellery into pure gold bars.

None from the retailer and jeweller community were made a participant to the scheme. The concept also failed with uneducated women in rural areas, the unbanked part of the population, who were reluctant to part with their gold jewellery.

Women considered the melting and purifying cost as a reduction in the quantum of gold and the additional making charges, when the jewellery was remade, also proved to be a major deterrent.

Given the emotional attachment to gold jewellery across the country, the concept did not work well.

Thereafter, the government made certain amendments to the scheme. Mutual Funds and Gold Exchange Traded Funds registered with the Securities Exchange Board of India were asked to deposit part of their gold and make the scheme more attractive for individuals.

While the interest income from gold deposit scheme would be taxable like any other income, the gold deposited under the scheme would be exempt from Wealth tax.

Hayagriv said to make the scheme a success, there was an urgent need to have jewellers as stakeholders. ``Presently, jewellers do not have a major contribution. However, with their vast reach all over India and understanding of the gold market, retailers and jewellers can be a major contributor to the success of the scheme.''

"We have suggested that there should be no questions asked on the source of gold and that wealth tax should be applicable on the realisation of gold,'' he added.

The Federation has also asked that the quantum of gold mobilised under the scheme should be reported on a monthly or a quarterly basis. This, the Federation has held, would be a major factor to bring out idle gold lying in household lockers and in temple trusts across the country, and would help stem the Indian government's decision on gold imports.

The goldbugs in this country are taking double hit. Hit on price increase on PM itself and increase on USD.

When was the last time we heard from the finance minister and BNM? Where is MYR heading???

I plan to hold till early or mid of Sept. And sell everything few days prior Fed next meeting in mid of Sept. It looks like QE taper is on the way.

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Is gold rise just a dead cat bounce?

By Garry White, and Emma Rowley

What is driving this tentative recovery in the market for the “safe haven” metal? A key factor may be that the sell-off in exchange-traded funds backed by gold has passed its worst.

“Support has come from the financial market turmoil in emerging economies, geopolitical tension in Syria and Egypt, together with the fact that gold holdings in exchange-traded products has been stable for a couple of weeks,” says Ole Hansen, head of commodity strategy at Saxo Bank.

“[That] could be taken as a sign that most of the institutional selling may be over or at least paused.”

John Paulson, the legendary hedge fund manager, may have more than halved his stake in the world’s biggest gold-backed exchange traded fund (ETF), the SPDR Gold Trust, in the second quarter of the year but this has not dampened investors’ spirits.

That may seem counterintuitive, after all, people watch what Paulson and his peers do in the hope that they represent the “smart money” to follow. However, some traders blame gold’s fall to its low on the last day of June on selling by these gold-backed funds to meet clients’ request to exit their positions.

Some now hope funds are close to finished in terms of selling their gold, after an outflow of 402 tonnes from ETFs over the quarter. To put that in context, that wiped out the bulk of the buying by ETFs across 2011 and 2012 put together.

Meanwhile, outside the investment world, Indian and Chinese demand for gold has been strong, while the fall in the price has likewise stimulated retail investors to buy gold bars and coins.

Together, consumer buying of the metal rose by 53pc to a total 1,083 tonnes in the second quarter of this year compared to 2012, the World Gold Council reported in its latest quarterly update.

That left overall global demand at 856 tonnes, 12pc below its level a year ago, according to the Council’s figures.

Some think that if the heavy selling period is over, the gold price has quite a bit further to rally, up to $1,450 an ounce or above. And yet, it still looks risky to call this anything more than – potentially – a short-term floor for the price.

Why? Look to the Federal Reserve again. The gold price plunge in recent months has been largely driven by the expectation that the US central bank will start to unwind its vast quantitative easing (QE) effort, which, given its inflationary effect, puts some lustre on gold as a store of wealth. On a broader level, the backdrop of an improving global economy – which allows the Fed to unwind QE – further erodes the appeal of gold as a hedge.

Of course, when the Fed will act is not totally clear. On Thursday the minutes of its latest monthly policy meeting led people to take differing views on when the wind-down of purchases – the so-called “taper” – will begin.

Analysts at Morgan Stanley saw the “key takeaway” as being that the Fed remains on track to taper its QE purchases in September.

“Fed officials are well aware that market participants generally see a September announcement of a start to QE tapering as likely, and they did nothing with these minutes to warn investors away from that view”, they said. “In our view, the recent gold price rally will likely fade towards year-end as the headwinds that have pressured gold throughout the year re-emerge.”

These are, in their view, a strengthening dollar – as QE is removed – driving up bond yields, which lessen the attraction of holding gold, which is a non-yielding asset, and “a continuing erosion in investor faith” in the metal.

Still, there is nothing like agreement in this area, with Saxo Bank making the call that QE tapering is a “temporary sideshow” which will be followed by “more QE coming in 2014, not less” on the back of negative economic data.

All that is clear is that the Fed holds the gold price in its hands.

Fed seen making first taper move in September
View from Jackson Hole retreat

JACKSON HOLE, Wyo. (MarketWatch) — The Federal Reserve seems on track for a small reduction in the pace of its asset purchase program in September, according to experts attending the central bank’s annual retreat in Jackson Hole.

There was a palpable sense at the gathering that Fed officials are eager to bring the era of extraordinary policy stimulus to an end.

Read what business economists expect of Fed taper

“There is a yearning to get back to normal” said John Taylor, the Stanford University economist, in an interview.

Jim O’Sullivan, chief U.S. economist at High Frequency Economics, said “the message is right now that they go in September. I haven’t heard anything to suggest expectations for a September move are off-base.”

Barry Eichengreen, an economist from the University of California Berkeley, said he sensed that the central bankers were looking past potential pitfalls.

“I think there is a desire to return to conventional monetary policy, but we don’t have a normal economy,” Eichengreen said.

He said he was surprised how little “visible alarm” there was from Fed officials about recent volatility in emerging markets tied to the Fed’s tapering plan.

Fed Chairman Ben Bernanke said the Fed would start to pull back from its $85 billion-a-month asset purchase program “later this year” if the economy continues to improve as expected.

Markets expect the Fed to cut the asset purchase plan by $20 billion in September.

O’Sullivan said the Fed might engineer a smaller $10 billion reduction at first.

Many participants at the Jackson Hole conference want the central bank to wait until later in the year.

They note there are an impressive array of challenges that await the central bank this fall.

For example, Congress and the White House have made no apparent progress on any way to end the bitter divide over fiscal policy. In addition, a spike in interest rates since the talk of taper started could stall the housing market and emerging market economies are slowing down in part due to take of a Fed exit.

After September, there are two more Fed policy meetings this year, one in October and the last in December.

“I think it is too soon,” said Susan Collins, dean of the University of Michigan’s Gerald R. Ford School of Public Policy. She noted that recent economic indicators has been mixed.

A September move “could be premature,” agreed Eichengreen.

But others argued that September was as good a time as any to move.

“The sooner, the better to get started,” said Taylor. Otherwise you just keep postponing the inevitable, he said.

Bernanke, whose views may decide whether the Fed moves in September, didn't attend this year’s Jackson Hole retreat.

Former Fed Gov. Randy Kroszner said he favored a small “step down” in September, after which there could be a pause for the central bank to gauge the impact on the markets and the economy.

If all goes well, the Fed could then reduce the pace of purchases over the next seven meetings until the middle of next year, Kroszner said.

Others weren't so sure that the tapering path would be so smooth.

“Everyone is realizing that tapering is not going to be easy,” said former Fed Gov. Lawrence Lindsey.

Interest rates spiked over 100 basis points just on talk from the Fed of a pullback.

“The Fed is learning it is hard to wean the addict off the drug,” Lindsey said.

Collins said that the markets might have to cope with “a range of views” from Fed officials about the right course of action.

“Hopefully markets are not going to overreact,” she said.

Glenn Hubbard, dean of the Columbia University Gradual School of Business, said he thinks the Fed will wait until December to slow the pace of purchases due to an absence of a clear sense of the economy’s direction.

One factor that may be driving the Fed is the transition to new leadership. Bernanke is widely seen as leaving his post when his term ends in January. A spirited debate has broken out over whether former Treasury Secretary Larry Summers of Fed Vice Chair Janet Yellen would replace him.

“The Fed would like to be headed toward exit on Bernanke’s watch,” said Vincent Reinhart, chief U.S. economist at Morgan Stanley.

Yes, you are right, no one in the market really know what Fed will do, I bet even Bernake himself is not 100% sure.

But we at the same time have not heard anything that the taper maybe delay, so I believe Fed is on track, but at lower level, not as much as 85billion, to test the market.

Another important piece of hint is the US Aug payroll report due Sept 6, one last piece of important info between now and Sept meeting.

So to be safe, I will off load my truck early next month after the Aug payroll report out (maybe to load the truck with more) and see what will happen next.

No harm to keep the gun powder in my own pocket dry and safe to prepare for next shot.

Oh yes, if you believe gold's going to go up, buy silver.

What does summer’s end mean for gold and silver?

Labor Day sees the end of the U.S. summer and everything tends to change as the financial community returns to its desks. Where will they take gold and silver this time?

LONDON (Mineweb) -

Today is Labor Day in the USA, the official end of summer as far as the country’s citizenry is concerned, and everything changes. From tomorrow the top bankers, fund managers financiers etc. are back at their desks supposedly refreshed from their summer in the Hamptons, the Caribbean or points further. Summer dependent businesses close down for another year, women start wearing fall and winter fashions regardless of the temperature – and the silly season in news comes immediately to an end. The equity market professionals are back and the next pattern of investment flows will rapidly start to establish itself.

For gold and silver investors everything could change. Some kind of direction will likely establish itself, but whether this will be upwards or downwards remains to be seen. If the past is anything to go by, September can be a strong month for precious metals, but it isn’t always so – take 2011 for example. Arguably the major turning point in the gold price after its heady days through the 2011 summer started immediately after Labor Day that year, but this has tended to be the exception. Those who move the markets saw a gold price rise through June, July and August 2011 which they reckoned was overdone – and the general trend in price has been downwards since with gold currently sitting some $500 below its heady 2011 peak.

This year gold and silver made something of a recovery from their recent nadirs through the summer months, but we don’t think this will have been seen as an over-excessive gain by the financial community in the same way that that of 2011 was. There does seem to have been something of a change of sentiment with regard to precious metals. Some safe haven talk has resurfaced, there is an increasing realisation that almost all the physical gold which may have been released by investors in the West has been taken up in the East – and more. Comex gold inventories have been slipping away and there are indications that some of the big bullion banks, JP Morgan in particular, are turning long on gold. Things could thus be about to change for the better for the precious metals investor.

But in the world of gold nothing is certain. There is the overhang of a possible, or even probable, Fed tapering of its bond buying programme. This has to come to an end sooner rather than later, but the Fed’s problem is to make the winddown in QE lead to a soft landing in equity markets which are nervous that any reduction in stimulus will have an adverse effect on company performance and the recovery, such as it is. Initially the markets saw the gold price as likely to be adversely affected by a winding down of QE, having been boosted by its implementation, but with further analysis it was also realised that the overall rise in the equity markets had also been stimulated by QE, and these could be even more vulnerable to its gradual withdrawal. As we pointed out here some time ago, gold was strongly on the rise well before QE was put in place. Equities were not!

What are things to look out for in the months ahead with regard to gold – and in markets in general? Firstly, the big gold ETFs – GLD in particular – could be seen as the true bellwether as to where gold is likely to trend. The big sell-off seems to have come to an end – or, at the very least, going through a hiatus. Recently GLD has picked up a small amount, but if heavy sales re-commence, then this is obviously a bad indicator for gold. Should purchases – even on a small scale - continue, this is a positive sign that sentiment is changing in gold’s favour.

Eastern buying: There are already indications that the improvement in the gold price has seen a slight slowdown in the volume of Chinese buying, with Shanghai gold premiums reportedly dropping back. However, gold premiums in India remain at very high levels following the government’s imposition of big precious metals import duties, with the recognition too that these are leading to gold smuggling on a hugely increased basis. One can probably discount India’s official gold statistics in the next few months as being totally unrealistic as they will not include the reportedly strongly rising grey market. As with Prohibition in the U.S. in the 1920s, banning, or discouraging by fiscal means, something that people really want can even serve to stimulate demand and there’s little sign that Indians’ appetites for gold hoarding has diminished.

The long and short positions on COMEX will need to be watched closely too – particularly those of the big bullion banks who seldom bet against uncertainty! And they have the financial clout to effectively corner the market – or indeed a significant part of it. Even more so with silver!

But, overall, it is the state of the U.S. economy and its supposed recovery that may yet be major factor for both gold and equities. Any recognition that recovery is slower than the Fed would like, especially if unemployment fails to come down to target levels, would make any tapering – perhaps apart from a token reduction – increasingly unlikely. Good for gold and equities, although at some stage the continuing parlous state of the overall economy may start to have an increasingly adverse impact on the latter.

What other factors are out there? The lower gold price and the likelihood of some serious strike activity in the South African mines may have a negative impact on global gold production. But, in truth, small changes in newly mined gold supply have little impact on the market at present. New production is so dwarfed by swings in investment and hoarding demand nowadays that it is largely irrelevant in the market place.

Gold will tend to continue to be moved by various U.S. statistics and indicators, both up and down depending on the ebb and flow of employment figures, housing starts, budget issues, etc., but also by the threat of an escalation in the Syrian conflict and unrest in Egypt, with possible spill over into other states where there is continuing tension between the Sunni and Shia Muslim factions. If the U.S., or any other western power, is drawn into military action in Syria this will be yet another destabilising factor in world geopolitics which should be positive for gold. The Eurozone crisis will also continue to raise its head from time to time as this is nowhere near played out yet.

In short there are any number of factors which may impinge on gold and silver prices in the months ahead. One needs to follow the likely indicators closely. Overall, these factors look to this observer to be more likely positive than not for precious metals investors. Safe haven investment in gold may well be beginning to return – there are so many uncertainties out there and the potential downsides in the equities markets, in the U.S. and Europe look to be greater than those in gold. We could be in for an interesting few months as markets play out, political tensions sway – and the Fed makes its intentions on QE a little clearer, although it seems that obfuscation may remain in this latter respect. Again, as we’ve said before, if gold does continue its recent rise, silver should do even better – but, as was seen on Friday, even a temporary fall in the gold price can leave to an even bigger one in silver in percentage terms. It is much more of a gambler’s metal, but it could be a good gamble

Taper or Not Taper...everyone is waiting...everyone is guessing...

Why the US Fed won't taper QE: James Rickards, author of Currency Wars: The Making of the Next Global Crisis

HILTON TARRANT: US job growth came in lower than expected in August, and the unemployment rate dropping to a four-and-a-half year low as workers gave up the search for work in the US could delay the Federal Reserve’s scaling back its massive monetary stimulus later this month.
All eyes are on the Federal Open Market Committee meeting in just over 10 days’ time. Until today’s data it was widely anticipated we would see some easing or tapering of the stimulus programme. But James Rickards, author of Currency Wars: the making of the Next Global Crisis, believes that we won't see any cutting back at all of the Fed stimulus because the American economy remains just too weak.

JAMES RICKARDS: I don’t think it's going to happen. Certainly it's on the agenda in the sense that the Fed is talking about and thinking about it – they certainly would like to taper. I don’t think there’s much doubt about that. And to a great extent the markets have priced that in.
I don’t think the Fed actually will taper in September – in fact, I don’t think they’ll do it at all this year and the reason is I'm sort of taking the Fed at their word. They said we’d like to. Tapering is the jargon, it's reducing asset purchases, but asset purchases are the way they print money. So what they are really saying is we are going to print less money.
But they said we are going to do that sometime this year if the economy grows in accordance with our forecast, etc. And so many people in the market have focused on the first part about tapering, but ignored the conditionality, the “if” clause about the economy conforming to their forecast.
So one thing you need to know about Fed forecasting – they have the worst forecasting record of any institution I can think of, any central bank or any private forecaster. Every year the Fed gives a one-year forward forecast. In ’09 they gave a forecast for 2010, in 2010 they gave one for 2011, etc. The last four years they’ve been wrong all four times by a lot – meaning one or two percentage points of growth, which is orders of magnitude when you are talking about GDP. So there’s no reason to have confidence in the Fed forecasting.
The actual economy is doing very poorly. My feeling is they are not going to taper because they’ll be tapering into weakness and the economy’s very weak. But it's a close call. I’d be the first one to say it could go the other way. If they do taper, they’ll be tapering into weakness, as I say, and I expect they would increase asset purchases some time by mid-2014.
Remember, this is the third time we've gone though this – QE1, which they stopped, it turned out they had to go back with QE2. They then stopped QE2 in June 2011, and by September 2012 they were back to QE3. Now they are talking about tapering QE3. But the history has been every time we do see these, the economy goes into a funk. And so I don’t think they’ll do it. But if they do I think they’ll be increasing asset purchases within say, six to eight months.

HILTON TARRANT: Does the Fed have to taper, or is this the new normal? Are we now so addicted to this liquidity, to these assets, that that’s kind of how we are going to go?

JAMES RICKARDS: A good question. The fed’s not doing this gratuitously. They are doing it to try and help the economy and to prop up the banking system, which is their mission. The problem is it hasn’t worked, it hasn’t worked well at all. So the question is do you give up or do you keep trying. Do you back away or double down? And there is a real division of opinion on that one.
One of the reasons this is so difficult to call is because the Federal Open Market Committee is evenly divided between those who think they should taper and those who think they should not. And the argument for tapering has been articulated by Jeremy Stein, one of the governors of the Federal Reserve. He said, look, you are getting less and less benefit out of this. Meanwhile you are increasing systemic risk and setting us up for another asset bubble and asset bubble collapse.
On the other side is Janet Yellen who says we have enormous slack in labour, we have an enormous slack in industrial capacity. There is no example of inflation arising in these circumstances and we should print more.
I've spoken to some of the Federal Reserve Bank presidents, Charles Owen of Chicago, Dennis Lockhart of Atlanta, among others, and they said theoretically there is no limit to the Fed’s balance sheet. Now I happen to disagree with that. I think there can come a very rapid, almost instantaneous loss of confidence. Once that happens nothing can save the dollar. We are not there yet, but we are getting closer all the time. As I say it will happen very unexpectedly.
So there are others that think the Fed can keep doing this, that they should keep doing it. There are others who think that the risks are not outweighing the benefits. The problem is they are both right as both sides have good arguments. This is what happens when you manipulate. You paint yourself into a corner from which there is no good way out.