The connection between quantitative easing and the gold price

Posted by USA Gold via Peter Grandich

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goldvsreservecredit

Why 2013 could be the best year to buy gold since 2008

Quantitative easing, the oft-referenced $85 billion per month shelled out by the Federal Reserve, comes down to the purchase of two kinds of securities — U.S. Treasury paper (bonds, notes and bills) and mortgage-backed securities. The Federal Reserve buys the Treasury paper from the federal government and the mortgage-backed securities from commercial banks. The first is a direct form of monetization (money printing); the second is an indirect form since a good portion of those funds are in turn also used by the banks to purchase Treasury paper. The two together comprise the bulk of what appears on the Federal Reserve’s balance sheet as “reserve bank credit.” At the present that figure stands at just over $3.2 trillion — up about $2.4 trillion since the beginning of the financial crisis in late 2008.

When you superimpose the gold price over reserve bank credit on a chart, it looks like this:

goldvsreservecredit

…..read more HERE (including the first paragraph. Also Peter suggests you click & read – This note_