The Fed has recently been engaging in a “temporary” Repo program.
Very few can explain the details in full of why this is going on, but what must be known is that this is abnormal and would not occur under the best of conditions. The likely cause of this response is underlying liquidity stress for banks. Below, is some context of how this issue has progressed.
It should be visible that the size of these arguably emergency measures is increasing.
Calling these measures QE or not is irrelevant at this point. What must be known is the FED’s balance sheet is expanding again.
Below is a picture of global central bank balance sheets and gold price rising in tandem. This suggests a correlation. The gold price in $USD appears to be especially correlated with the FED balance sheet.
Since the start of this Repo program the FED’s balance sheet has begun expanding again per the chart below.
Traders have begun to understand what this all means. Per the technicals of the gold price and the GDX (gold miners), it appears that traders have decided that the FED balance sheet will continue to expand for some time and this will be bullish for gold and especially bullish for the GDX.
The breakouts are fresh so the next couple days will be important. Expect a retest of the breakout line and then hopefully follow through with the FED meeting at the end of this month.