A Happy New Year for Metals
Commodities / Gold and Silver 2010 Dec 30, 2009 - 10:20 AM GMTBy: Dr_Jeff_Lewis
In welcoming 2010, the stars could not be better aligned for precious metal investors. Stimulus spending, coupled with a low federal funds rate and a new jobs program, should put plenty of money in the hands of precious metals holders.
Stimulus and Silver
2009 was just the beginning for federal stimulus programs. Although the American Reinvestment Act was pushed through Congress in a matter of days, the money has moved much slower. Currently, only 58% of the allocated $158 billion has been awarded to start work on “shovel ready projects.” However, of all the money awarded, only about $37 billion has actually been spent thus far. Many more projects are slated to start early 2010, and nearly all of the money will have been spent by 2011.
This creates an excellent environment for precious metals investors who will be well served riding the tides of $260 billion in fresh cash for the economy. With so much money being spent in such a short time frame, inflation is nearly guaranteed.
One beneficial part of the stimulus is that much of the contracting is given to small, local firms that exist in each Congressman's district. By allocating funds to smaller companies, it is likely that the funds will be spent quicker and in the locality that the project was requested, allowing for quick infusion of cash into local economies.
Fed Unwilling to Raise Rates
Anyone watching Bernanke has already discovered that the Federal Reserve chairman has no intention of raising rates for months to come. His comments in front of the House Financial Services Committee suggest he is willing to keep rates as low as 0-.25% until the signs of recovery are all but unnoticeable, a plan that may create lofty inflation numbers.
This is quite good news for investors of gold and silver. These precious metals will only increase in value as green shoots appear, the consumer starts to borrow and spend, and the amount of currency in the system grows exponentially.
Stimulus II
Just as it appears the economy may be enjoying an inflationary kick with positive GDP numbers and improving unemployment figures, the government has again reverted to spending to stimulate the economy. Few complaints should be heard from those who hold precious metals such as silver, however, as the amount spent is sure to be icing on the inflation cake. It is still up in the air whether the $154 billion bill will even pass, but we could expect at least a small jobs bill to liven up government spending and ultimately drive metals’ prices higher.
Get Ready for the New Year
Silver prices have consolidated from their 2009 bull run, but don't think today's prices are permanent. The tailwinds are well behind silver as an investment and inflation hedge throughout the new year, and investors who buy now will be the best poised when inflation makes its way through the market. Between the stimulus, a low federal funds rate, bursting deficits and the possibility of a secondBy Dr. Jeff Lewis
Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com
Copyright © 2009 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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