Thanks to that "party animal" Ben Bernanke, silver prices today are enjoying a nice bounce.
That's because the U.S. Federal Reserve chairman, along with the other members at the Federal Open Market Committee (FOMC) meeting yesterday, decided to keep the quantitative easing (QE3) flowing steady with $85 billion of bond buying per month.
After the Fed announcement, silver prices rallied by 5.5% to more than $23 an ounce. That's the precious metal's biggest one-day gain since June 28.
Kit Juckes, global strategist for SocGen, said in a report quoted by Bloomberg, "Bernanke had threatened to take away the punch bowl and bring the QE party to an end. But he's changed his mind, found more happy juice, and told us all to 'Party on, dude!'"
The FOMC said in a statement it would wait for "more evidence that [economic] progress will be sustained before adjusting the pace of its purchases" and pointed to recent upward moves in interest rates as "restraining economic growth."
Bernanke continued to send mixed messages about tapering, though, which eventually could hurt silver prices.
On the one hand, the Fed chairman said the decision to not taper was a "precautionary step" because the Fed was still worried about U.S. economic growth. The Fed in June downgraded its outlook on growth for 2013 to 2.3% from 2.5% and for 2014 to 3% from 3.3%.
But Bernanke also said that even if the economic data continued along its present path, a taper could come "possibly later this year."
Money Morning Nails It
The Fed's decision to keep the QE3 train running full speed caught most of Wall Street's analysts off guard, most of whom were expecting a token $10 billion taper move.
But Money Morning Chief Investment Strategist Keith Fitz-Gerald was not surprised at all. For months, he has told anyone who would listen that the Fed would do nothing.
"The [financial] markets have become so addicted to cheap stimulus that I don't believe Bernanke has the guts to take his foot off the proverbial gas pedal," Fitz-Gerald said in June.
The Federal Reserve's loose money policies are one reason we remain bullish on silver prices today.
Yet there is a more behind the strength in silver than just the Fed's money-printing policies…