*Buy gold ahead of QE3 as money creation has a strong impact on prices
*SocGen expects major announcement in Jan 2012 to keep fed funds rate at zero till unemployment falls below 7.5% (translated as infinity)
*SocGen expects The Fed to announce QE3 as $600 B in MBS purchases in March 2012
*QE3 to propel gold to $1900-$8500
A combination of weak Q1 2012 GDP and softening inflation could push the Fed to another round of monetary expansion.
SG economists look for a two-step easing process:
1) In January 2012, a major announcement with the Fed promising to keep rates at zero until unemployment falls below 7.5% or inflation moves above 3% on aa sustained basis.
2) In March 2012, the announcement of another round of QE. We expect the next round of QE to be concentrated on MBS purchases and be worth about $600bn over six to eight months. This would increase the Fed’s securities portfolio from currently $2.65trn to $3.25trn by the end of 2012.sustained basis.
Socgen Patience - Bad News Will Become Good News