 |
|
| |
|
|
| |
Fed's liquidity infusion is another quick fix to an unquantifiable market crisis
NEW ORLEANS (March 13, 2008) – While the Fed’s moves to provide $200 billion of liquidity to major Wall Street investment banks may provide a temporary boost to the stock market, analysts at Blanchard say the current global market crisis continues to unwind and gold will remain a strong investment safe-haven that will continue to increase in value.
“Even in light of the Fed providing safe, high-demand treasury securities in return for sub-prime mortgage-backed securities that have been key to creating the current global market crisis, we still haven’t seen the bottom yet,” says Donald W. Doyle, Jr., Chairman and CEO of Blanchard and Company. “The sub-prime mortgage mess continues to unwind, and the financial institutions and markets associated with them still face more bad news over the long term.”
The Dow saw the largest single-day pop in the last five years on Tuesday, but Doyle says that the Fed Funds Futures are still pricing in over a 50 percent chance of a 75-basis-point cut next week, and that further devaluation of the dollar continues to bode well for gold.
“On Wednesday, gold recouped all of its Tuesday sell-off losses and remains near record highs, while the dollar continues its descent to fresh record lows,” Doyle says. “Investors and analysts need to look at the economy from the big picture view and recognize the fundamentals in place.”
Doyle says the Fed swap of cash for mortgage-backed securities may help banks be more likely to lend money to businesses and individuals, and that should be positive for gold as the increased liquidity lessens the banks’ need to meet margin calls via gold sales, further boosting gold’s potential for price increases.
“The commodity super-cycle remains firmly in place,” Doyle says.
|
|
|
|
|
|
| |
|
Copyright © 2010 Blanchard and Company, Inc.
|
|
