McEwen Mining Inc (MUX)

[gharma]

Gold will likely to continue to move up and down on the vagaries of statement from the U.S. Fed and Ben Bernanke with regard to the latest buzz word – ‘tapering’ – in other words a reduction in the Fed’s bond buying programme.

I have seen a number of stories pointing to downward pressure on gold from the possibility that the Fed stops dumping money into the banking system to keep it afloat. Apparently there is some form of shortness of vision running around.

Fed stops pumping in fiat at a trillion per year via bond purchases. That allows finally getting a handle on how large the money supply grew, on how had the inevitable inflation may be expected to turn out.

BUT much more importantly that move, if it ever happens, starts a return of bond/treasury to market driven pricing. This increase in interest rates (to the US gov) would make obvious the impossibility of paying off the national debt as the interest burden could rise toward being the largest item in the budget if the rate goes too high.

So how is it that "tapering" is bearish for gold again ?

jmo