Is The Shiny Stuff Signaling Quantitative Easing? (GLD, AUY, ABX)
Quantitative easing may be coming back in a stronger form than many initially thought, and gold (NYSE: GLD) might be the way to play it.
This morning, existing home sales were released at 10:00 a.m. The results were not pretty. The numbers showed home sales came in at 3.83 million, almost a million homes worse than expected. Analysts had forecast a release of 4.72 million homes that were sold.
This was a 27% drop from the prior period, and it's signaling that the Fed may add to its easing policy by buying more Treasuries.
Last month, the Fed announced it would roll maturing mortgage backed securities (MBS) into U.S. Treasuries to the tune of $300 billion.
Right after the home sales came out and stocks plunged, the gold ETF didn't fall nearly as hard as stocks did.
With rumors out now that the Bank of Japan may be intervening in the currency markets, and the Fed may be doing more quantitative easing, this should lead to more inflation.
What better way to play the reflation/inflation trade than buying the GLD ETF or one of the gold miners?
Gold enjoys a coveted status due to the fact it's seen as a a currency hedge against deflation, and inflation.
Some of the names investors may want to look at are Newmont Mining (NYSE: NEM), Barricks Gold (NYSE: ABX), and Yamana Gold (NYSE: AUY). The names I favor in this space are Barricks and Yamana, as these companies have lower costs than the other producers.
If both of these scenarios pans out and more cheaper money enters the foray, investors would do well looking at gold to profit from this.
Shares of GLD are up 52 cents this afternoon to $120.30. Barrick is up 8 cents to $44.19, and Yamana is down 18 cents to $9.93.
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