By Geena Paul
NEW YORK: Do you know there is no official limit on the Federal Reserve of the United States for printing money. And, the result is disastrous at times. If you check the track record of the Federal Reserve, there is an unholy nexus between the Federal Reserve’s decision to print money and the gold prices.

In fact, several publications have written about it earlier also. In the beginning, in the original monetary system that was set up in the United States by the Founding Fathers had limits to how much money could be printed. And the US currency was backed by gold and silver, creating a gold standard.

By 1971, with the help of global and political events, the United States was completely off of the gold standard, and there was officially no limit to how much money could be printed by the Federal Reserve.

Since then the economy has had booms and busts many times over, and on a global scale all are feeling the repercussions of having a monetary system that is without discipline.

And, most of the time when the Federal Reserve decided to interfere in the market, it helped the gold prices.

This was not different on Wednesday (March 18, 2009) also. Gold futures on the COMEX division of the New York Mercantile Exchange slipped for the third session on Wednesday, but rallied quickly during the electric trading after the US Federal Reserve sprang a surprise, deciding to buy a large amount of longer-term treasuries to help the economy recover.

Gold price for April delivery was down $27.70, or 3 per cent, to settle at $889.10 per ounce. However, in the electric trading time after trading floor closed, the precious metal soared to as high as $954, more than $70 away from the intraday and 2-month lowest level of $882.70.

What surprised the market was that Fed committed to buy $300 billion in longer-term treasuries to help the US economy recover. The central bank also is going to purchase more mortgage-backed securities and agency debt. This decision is considered to create more money to buy national debt, which means accelerating the inflation and weighs on the dollar. The dollar index was down nearly 3 per cent and the dollar rate versus euro dropped sharply to a 2-month low.

The recovery of gold’s safe-haven appeal helped the precious metal amazingly surge almost $60 in only two hours during the electric trading time.

One thing as certain as gravity is that precious metals, more importantly gold, will protect you from hyper-inflation in the coming times due to all the money that is being printed up by the Federal Reserve for bailouts and so forth. Remember, the money printed by the federal Reserve is not backed by gold reserve.

Precious metals have historically been a proven hedge against hyper-inflation. In the 1970s, the US dealt with massive inflation and at its peak in that time inflation reached 13.3%. The US economy was not in nearly as much trouble as it is today. Due to the 13.3% inflation rate in the 1970s the value of gold skyrocketed and had a growth of 2500%. This explains the current gold rush that is occurring, and more importantly illustrates where gold could hit in the coming times. Never in the history of the US Fed printed so much money, and soon Americans will feel the repercussions.

The Federal Reserve was created in 1913-1914 in order to bring stability to the economy and yet almost every major crash, including the great depression, can be attributed to the Federal Reserve.

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