Gold And Silver Up Following Draghi Speech

Gold and silver prices saw a decent pop higher Thursday and Friday, occasioned of course by talk of more easing from the Federal Reserve and European Central Bank. Mario Draghi’s comments Thursday that the ECB was prepared to “do whatever it takes” to save the eurozone have raised expectations of another large-scale European money-printing venture, though whether Draghi is actually prepared to walk the walk on this score remains to be seen. As remarked in our Monday article, holding the likes of Spain and Greece’s feet to the fire by refusing to monetise debt is a way of forcing governments in these countries to make cuts. It may also be a beneficial crisis for the EU if it forces the kind of eurozone fiscal integration that many would have thought impossible just a few years ago.

Back in the USA meanwhile, the Fed’s “QE3 timetable” is said to have been moved forwards, from September to August. You’re probably sick of reading about endless speculation on this front, and perhaps disheartened that markets are now so heavily influenced by monetary central planners. One point worth making though is that the Fed may choose the nuclear option: an open-ended commitment to nominal-GDP targeting. QE to infinity in other words.

The Cobden Centre has reposted another good article from John Butler’s Amphora Report, analysing the recent surge in agricultural commodity prices. He notes that the surge in crop prices from autumn 2009 through 2010 translated into a spike in consumer prices by early 2011 – and had important political consequences as well: 2011's “Arab Spring” in large part caused by anger at rising food prices. Given the recent surge in corn, wheat and soybean prices, John argues that “we should be confident that the current food price spike is more than sufficient to contribute to a material rise in headline CPI in the coming months.”