Fed Tolls The Bell For Gold US$2,000

Fed's action to weaken the U.S. dollar.

This is a brief but very important update to my previous post of July 18, 2019, "U.S. Dollar Stronger For Longer".

Everyone back into the gold market.

Fed's new QE to push US$ down and gold up

If it looks like a duck, walks like a duck and quacks like a duck, it is probably a duck. Thus despite the protestations to the contrary by Chairman Powell, last week's announcement that the Fed intends to buy $60 billion of bills per month until mid-2020 certainly is QE on a massive scale. As such, the total monetary base should rise by almost half a trillion dollars to $3.76 trillion by June 30, 2020.

Chart by the Author from Federal Reserve Data

The consequence of this should be a decline in the U.S. dollar, which should please Mr. Trump and U.S. exports. However, it could also result in a rise in imported inflation.

This should push the price of gold back to its equilibrium level with the AWMB, which stands at US$ 1,900 per ounce, but should be higher at possibly US2,000 per ounce by mid-2020, as excess reserves continue to move out into the real economy.

Chart by the Author from Federal Reserve Data

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.