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It would scare the crap out of people if the FED started buying Gold.<<<<
If I was in charge.
1) I wouldn't tell anyone I was doing it.
2) I would do it slowly a little at a time buying on dips and stabilizing the price.
3) Like anything else, if there is more demand, the expectation is that the price will go up.
4) I wouldn't have the Fed Reserve do it per say but have whatever entity that actually holds the gold (Treasury ?) do the buying. The Fed Reserve could do it also instead of buying and selling bonds as a way of altering the value of the dollar (in relation to other currencies ) and money supply.
Yeah I would expect buying gold would reduce the value of the dollar. As the dollar went down the gold holdings would be closer to being = to the value of the dollars in circulation. If the velocity of money goes up (it is really low now) Less money needs to be in circulation also. I suppose interest rates would go up if the Fed Reserve bought fewer bonds for whatever reason.
Interesting that buying gold, which should make the dollar stronger, would make it go down in value (maybe just in relation to gold)
Anyway I was just wondering what the effect would be, it wasn't a proposal. Maybe we will wake up one day and find out that the reason gold went to $1900 was because of government buying.
Toofuzzy
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