Federal Reserve Chairman Jerome Powell spoke Tuesday in Denver on “Data Dependence in an Evolving Economy.” He reiterated and tried to assure the crowd that the economy remains strong and the Fed supports keeping the economic expansion going.
Fed Powell also addressed the repo scare from a couple of weeks ago were overnight repo lending dried up. Taskmaster4450le spoke about this today in his post title,
Where Are People Going To Hide?
Turning to short-term funding markets, Powell said “a range of factors” might have caused the turmoil seen last month when the cost of short-term borrowing spiked as firms scrambled to get funding.
Regardless the cause, Powell said it was now time for the Fed to increase the size of its balance sheet. He said the central bank may purchase short-term Treasury bills.
Some analysts call this a “soft” form of quantitative easing, because the Fed buys these securities from the market, but Powell bristled at this description.
“I want to emphasize that growth of our balance sheet for reserve management purposes should in no way be confused with the large-scale asset purchase program that we deployed after the financial crisis,” he said.
During the Great Recession QE is injected tons of money into the economy by buying bonds and mortgage-backed securities in hopes of jump starting the economy. And we are still feeling the effects of QE from ten years ago because money poured into the stock market which has been artificially inflated throughout the years through all the buyback programs (Apple is one of the biggest culprit). At some point, the bubble will pop, prices will fall and money will migrate in to precious metals (and potential cryptocurrencies).
According to the World Gold Council, gold-backed ETFs bought 75 metric tons of the gold worth almost $4 billion in September. The SPDR Gold Shares ETF (GLD), the world’s largest and most liquid gold-backed fund, bought 43 tons more bullion during the 30 days.
This is the Smart Money directly at work and they are adding leverage to their investments/trades. Today I noticed unusual options activity in GLD. The Smart Money bought over 6000 call options with a strike price at $149 that expire in March 2020.
This is on top of the 7000 call options they bought yesterday.
I can’t say I have seen call options going out this far, but this trade set-up has plenty of time of being profitable as the chart suggests the next target for GLD is the $152.
This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.
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