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Banister thinks it will be a combination of actual money printing as well as the leverage which Europe is expected to use to almost triple the size of the European bailout fund. Banister also thinks there will be a "backdoor" quantitative easing program in the U.S. "You're seeing the money supply really growing rapidly in the last several months," he said. Banister does think that gold and equities can move together "I think you will see gold attacking the $1,900 highs in the next few months" even if the stock market moves higher. GMG's Pursche, on the flip side, said the European Central Bank, or ECB, has already been funneling money into the system but that investors need to start caring about inflation for gold to mount a big rally. "They are doing it, they just don't talk about it ... actions of the ECB are not that different than the U.S. Federal Reserve." Pursche said the ECB has been giving money to local central banks who then buy bonds of distressed countries, which has been helping prop up bonds prices in Spain and Italy. But Italy's lackluster bond auction Friday where it borrowed €500 million less than it had hoped at higher borrowing rates, proved there is more risk ahead. "
It will take another quarter of slightly above expectation data for people to start talking about inflation again," estimated Pursche. "Gold will be investor demand driven for the end of the year and beyond that the inflation picture will have to take hold for prices to appreciate further." Gold mining stocks were mostly higher Friday. Kinross Gold ( KGC) was down 0.34% to $14.80 while Yamana Gold ( AUY) was adding 1.83% at $15.59. Other gold stocks, Agnico-Eagle ( AEM) and Eldorado Gold ( EGO)were trading higher at $43.64 and $19.75, respectively.
-- Written by Alix Steel in New York.