Sales of American Eagle gold coins soar

Demand for gold coins in the US has soared since the presidential election, as small investors fret about the lack of action to address America’s ballooning debt. The US Mint’s sales of American Eagles, one of the most popular gold coins, leapt 131 per cent in November, hitting their highest level in more than two years. The Royal Canadian Mint also had its strongest month of sales this year.

Terry Hanlon, president of metals at Dillon Gage, one of the largest bullion dealers in the country, said sales had risen sharply “within a day or two” of the election.

“You’ve got a lot of people who are very worried about the economy. With the election they saw that nothing was going to change,” he said.

While coins are a small part of the overall gold market, the jump in sales highlights gold’s role as the favoured investment of disenchanted Americans. The political gridlock in Washington and the prospect of further quantitative easing when the Federal Reserve’s “operation twist” expires at the end of this year have fuelled demand for precious metals among small investors. “They don’t believe in Uncle Sam any more,” said the head of precious metals at a large bank. Read more >>

The Trouble with Printing Money

For a while now, I have been expecting a coordinated, global central bank action that would seek to print more money out of thin air, or "QE" (quantitative easing), as it is now called.  Now we have two of the most important central banks, that of the U.S. (the Federal Reserve) and in Europe (the ECB) having committed to open-ended, limitless QE.

In Part I of this report, we analyze the actions themselves, and then in Part II we discuss the implications to individuals and those with responsibilities to manage money.

The most recent announcement came from the Fed, and it had these features:

The creation of $40 billion a month out of thin air to purchase agency mortgage-backed securities (MBS).

The continuation of Operation Twist, which uses short-term Treasury bills and notes on its books to purchase long-term Treasury paper (that's 10- and 30- year bonds).

When MBS payments come in – the Fed holds over $840 billion dollars of those – they will buy still more MBS paper ('rolling' the payments into new MBS, as it were).

Taken together, the Fed will expand its balance sheet holdings of long-term assets (i.e., "debt") by ~$85 billion per month through the end of the year...but wait!  There's more...

This time, unlike the prior two QE efforts, the actions will be taken without any pre-defined limit.  
QE will continue until the labor market improves "substantially," whatever that means.  But wait...there's even more!

If deemed necessary, the Fed will "purchase additional assets" and "employ other policy tools."

As if all that weren't enough, for good measure, the Fed committed to a six-month extension of the 0.0% to 0.25% target range for the Fed Funds rate until at least mid 2015.

Read more >>