By Melissa Pistilli-Exclusive to Silver Investing News

After taking a dive earlier this week as confidence rushed into the equities market, the silver price rallied to a three-week high, up 12.7 per cent to $13.44/oz on the COMEX on Thursday morning, out-performing gold.

Silver and gold prices are riding high after the Fed’s surprising announcement Wednesday that it will be implementing “quantitative easing measures” by purchasing $300 billion in longer-term Treasuries. The central bank is also planning to buy $750 billion in mortgage-backed securities and agency debt.

It’s not just the $1.25 trillion that’s got the markets sweating; it’s the underlying meaning behind the Fed’s use of “quantitative easing measures.”

“In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability,” the Fed said. Apparently, “these circumstances” are seriously dire. These “tools” are considered the last resort for institutions like the Federal Reserve. Think “nuclear option” for any Western leader. When all else fails . . . . . . .

The move has signaled the markets that the financial crisis runs much deeper than was believed earlier in the week when Ben Bernanke’s words of encouragement sent investors back into the equities markets.

The major concerns are now hyperinflation and currency devaluation. “I think with all this money the U.S. government is printing, inflation is going to be the main concern going forward,” said Mike Glaser, LaSalle Futures broker.

Precious metals analyst Mark O’Byrne warns that the Fed’s actions could lead the world into an “international monetary or currency crisis” as other central banks follow their lead creating “competitive currency devaluations.” O’Byrne likens the Fed’s creation of trillions of dollars to purchase US debt as similar to the “monetary policies of Third World banana republics.” Such policies will undoubtedly lead to serious dollar depreciation, he cautioned.

The news has already chopped the dollar index by its lowest drop in over twenty years, nearly 3 per cent. Peter Schiff, President and chief global strategist at Euro Pacific Capital said the Fed’s purchase of Treasury and agency debt is fortuitous for those holders “looking to bail out,” but a nightmare for the dollar-based investments. Schiff forewarns that the Fed’s actions have set the dollar on a path to distraction.

Of course, rising long-term inflation is actually good news for precious metals prices as investors seek a safe-haven for their assets.  And that’s why we’re seeing the surge in silver and gold prices today. “Investors are concerned about a systemic collapse of global financial markets and mechanisms,” said Citigroup analysts. Citigroup has increased its 2009 silver average price forecast 25 per cent to $12.50/oz and its 2010 average price by 13 per cent to $13.60/oz.

Silver Mining Stocks Trading Up on Higher Silver Prices

Thursday, Shares of First Majestic Silver Corp. [TSX: FR] were trading up 12.22 per cent to $2.02, down from a 52-week high of $4.97.

Shares of Impact Silver Corp. [TSX.V: IPT] were trading up 9.26 per cent to .59 cents, down from a 52-week high of $1.74.

Shares of Pan American Silver Corp. [TSX: PAA] were trading up 11.26 per cent to $21.84, down from a 52-week high of $41.30.

Shares of MAG Silver Corp. [TSX: MAG] were trading up 7.71 per cent to $6.01, down from a 52-week high of $13.50.

Shares of Endeavour Silver Corp. [TSX: EDR] were trading up 9.47 per cent to $2.08, down from a 52-week high of $3.87.

Shares of Silver Standard Resources Inc. [TSX: SSO] were trading up 10.08 per cent to $19.43, down from a 52-week high of $33.40.

Shares of Hecla Mining Company [NYSE: HL] were trading up 21.89 per cent to $2.06, down from a 52-week high of $13.14.

Shares of Avino Silver & Gold Mines Ltd. [TSX.V: ASM] were trading up 8.62 per cent to .63 cents, down from a 52-week high of $1.74.

Shares of Great Panther Resources [TSX: GPR] were trading up 9.09 per cent to .48 cents, down from a 52-week high of $1.48.

Shares of Coeur d’Alene Mines Corp. [NYSE: CDE] were trading up 37.11 per cent to .90 cents, down from a 52-week high of $4.35.