Dan Norcini continues:

“Goldman Sachs expects, next month, for the Fed to come out of their policy meeting announcing QE4.  It will be a purchase of $45 billion each month in Treasuries.  This number will be in addition to the already existing QE3, which is $40 billion per month in mortgage-backed security debt.

But in a sense, Eric, QE4 is going to be a replacement for Operation Twist.  Operation Twist was designed to push down the long end of the curve in order to keep interest rates artificially low....

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“But here we go, now we’re talking about an additional $85 billion each month.  This is fresh purchases of Treasuries.  Here’s what is interesting, Goldman Sachs expects that to continue all the way through 2013.  So do the math, that’s more than $1 trillion worth of QE for 2013.

In 2014, Goldman believes the economy to pick up.  They believe there will also be a drop in unemployment at some point in 2014 which will allow the Fed to drop those $85 billion in purchases back down to $50 billion each month.  So you are talking about $600+ billion for 2014.

Goldman expects this to continue all the way into 2015.  So we are looking at close $2 trillion of QE over the next couple of years.  Keep in mind this is already in addition to the $2.5 trillion of QE1 and QE2.  We are talking about close to $4.5 trillion which has been and will continue to be manufactured out of thin air in order to keep interest rates artificially low.

Goldman also predicts there will be no change in the Fed’s interest rate policy until 2016.  So we are talking three full years, 2013, 2014, and 2015 where we will have these near zero interest policies from the Fed.  Now as you know, any time you have a net-negative real interest rate environment like this it is friendly to gold.

So you take that near zero interest rate environment, with negative real interest rates, plus close to an additional $2 trillion of upcoming additional QE, and here is what I can say to that:  Anyone who does not own physical gold is committing financial suicide. 

You simply have to own the metal to protect yourself from what these people are going to do to the currency over the next three years.  There is no way to avoid an increase in the price of gold based on what Goldman sees coming out of the Federal Reserve at this upcoming policy meeting.

So gold had the big sell order yesterday that knocked it down, but the fact is they could not break the market down below $1,700.  The reason they could not break the price down is because there are some very big players in the world who understand full well what the Federal Reserve is going to be doing for the foreseeable future.

These players are among those big buyers accumulating physical gold on pullbacks.  KWN readers should be buying gold on dips, and if some of them don’t have a position in gold yet, they need to get some physical gold to protect themselves from what these people are going to be doing.”

© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

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Eric King

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