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Gold and silver prices are showing the first signs of strong resistance to the steady downward pressure exerted by the Fed and its buddies on Wall Street.

August 31, 2011 – Gold and silver prices are showing the first signs of strong resistance to the steady downward pressure exerted by the Fed and its buddies on Wall Street. But the stock market hasn’t stumbled, so something must be going on.

For one thing, big corporate money has been busy. That alone can’t hold things up, but the sweet scent of free money sure can. Bernanke has painted himself into a corner and the pressure is on for the Fed to do something. His feeble attempt to kick the can into Congress apparently fell on deaf ears, but not his hints of future quantitative easing.

According to the OMC’s August minutes some Fed members “expressed the view that additional accommodation was warranted because they expected the unemployment rate to remain well above, and inflation to be at or below, levels consistent with the Committee’s mandate,” and some even “felt that recent economic developments justified a more substantial move at this meeting.” Scarier still, most members still suffer the delusion that the committee “could contribute importantly to better outcomes.”

The biggest problem facing the committee is not whether to have a go at QE3 – after all, QE2 was such a smashing success – but how to shove it down our throats without us choking on it. That should not prove to be that daunting a task because they have had a lot of practice disguising their previous antics hashed out behind closed doors.

One popular idea floating around is not to buy up more paper outright but swap out what they already have for paper maturing further down the road. No money gets “spent” so nobody complains. But in fact they will have monetized more debt, pushing the real problem a short ways into the future when it will reappear as an even more devastating threat.

For a while the speculators had a good thing going, buying gold and silver here on the cheap and cashing in quickly on the global exchanges. But now that the fundamentals are taking back control we can expect the speculators to start backing out of the market.

As the recent volatility dies down, the more timid investors will start to rally around gold and silver and get prices back on track.

Shannon King

Senior Staff Writer – GoldSilver.org

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