Commodities Analysis by David I. Kranzler covering: XAU/USD, XAG/USD, Gold Futures, Silver Futures. Read David I. Kranzler's latest article on Investing.com
that is flowing to the east, I think it’s easy to make the case that this massive demand for physical gold is a major factor in pushing the price of gold higher.The breadth of countries with Central Banks now accumulating gold was not much of a factor until the last couple of years and I believe the proliferation of Eastern Central Banks has offset the seasonal weakness that historically has affected the March through June period.
This is money that returns to the financial system, primarily in the form of banking and financial system liquidity. The Fed could keep that money in the facility with just a small increase in the rate it pays. I would argue that the Fed has created this systemic liquidity to offset the deteriorating quality of large and small bank balance sheets – primarily CRE and consumer loans but also leveraged corporate loans.
Similarly, and again through the end of June, the Monetary Base has been rising since March 2023:The final, and foremost aspect of the Fed’s “stealth QE” is the $2 trillion drain of the Fed’s reverse repo facility. The facility was at $2.375 trillion at the end of March 2023. This “stealth QE,” which is undeniable, is the reason that gold has been hitting successive all-time highs. It will be interesting to see if the Fed cuts rates at its September FOMC meeting because it’s obvious the economy is starting to feel the effects of high rates.
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