QE is simply an extention of reducing interest rates which, in turn, is implemented by CBs to stimulate growth to counter deflation/recession.
When interest rates are virtually at 0 central bankers simply print money and buy debt from banks to free the banks to continue lending which in turn is expected to lift the economy. Some of this cheap money finds itself in the stock market chasing dividends and capital growth; hence the lift in the US stock market on rising P/Es.
The question is will corporate earnings lift over the next 12 months to justify the currently rising P/Es. If not we'll likely see a stockmarket correction and a gradual withdrawal of QE3, IMO. If corporate profits lift then QE3 is likely to be withdrawn more quickly with a corresponding lift in inflation and a drop in unemployment. (Remember Bernanke's statement last year re an exit strategy for QE3)
Perhaps some gold experts would like to comment on the likely future POG over this cycle.?
It seems that any indication by the Fed that QE3 will continue for the rest of the year is good for the POG (indication of further deflation) while, long term, inflation/hyper-inflation is needed to push up the POG.
There's alot of no mans land in between!
Reasoned comment on the transition from QE to growth/inflation and how it will likely affect the POG would be appreciated. I realise that the 'doomsters" will lumpingly write off this probility as wishful thinking.
