"QE3 has reignited inflation expectations"

Quantitative easing is pure inflation, the classic debt monetization that has proved so dangerous and ruinous all throughout world history. Gold and silver have always thrived as currencies are being debased, as they've proven abundantly during QE1 and QE2. And despite starting out small, the open-ended nature of QE3 has really ignited inflation expectations like nothing we've seen in a long time.

So the psychology of QE3 is likely to drive big increases in investment and speculation demand for gold and silver as long as the Fed keeps this campaign alive. There is an excellent chance QE3 will ultimately push both these metals to new record highs, perhaps as soon as next spring. And of course as gold and silver power higher, the stocks of the miners bringing these metals to market should amplify their gains. ...

The bottom line is the Fed's quantitative-easing campaigns in recent years have been hugely beneficial to gold and silver. No matter how the Fed wants to present it, QE is classic debt monetization. Naturally the precious metals thrive in times of inflation, and QE is as blatant as inflation ever comes. The more dollars created out of thin air, the higher they bid the far-slower-growing gold and silver supplies.

While QE3 started out small, odds are it will be expanded considerably. After its initial launch QE1 was nearly tripled, and QE2 was tripled. For political reasons the Fed is reluctant to fully unleash its inflationary plans all at once. And the open-ended nature of QE3 has reignited inflation expectations like nothing we've seen in many years. It is going to ultimately drive traders to flock into gold and silver.

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