Citi: If NEW QE, Then Buy Gold
by Tyler Durden
Some very curious thoughts ahead of tomorrow’s FOMC announcement from none other than Citigroup:
Why QE3 FX impact may fizzle
There are several major differences between QE3 now and past QE. The one that is least remarked on is that the world outside the US is much less attractive now than in March 2009 or August 2010 when previous QEs were announced. In earlier QEs, EM was much more attractive, having shrugged off the debt crisis, there was an attractive destination for the liquidity the Fed was injecting into the global economy. Now the term ‘global leadership’ is linked to the US with its 2% (plus or minus) growth rate, and pessimism over Chinese, Brazilian, Indian and other major EM economies. So the downside risk is that the new liquidity sloshes around the banking system rather than being used for investment abroad. The outcome would change if China embarked on a major stimulus programme, though for now investors are not positioning themselves for such an expansion.