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QE

Gold buyers struggle inside rising wedge on Fed dayWhile a year-long resistance line has been testing gold buyers for one week, a six-week-old rising wedge bearish chart pattern teases sellers as markets brace for the Fed’s verdict. Given the sluggish RSI and receding bullish bias of the MACD, bears await a downside break of the $1,828 mark, comprising 50-SMA and 61.8% Fibonacci retracement of November-December downside. Following that, the lower line of the stated wedge near $1,816 becomes crucial as it holds the key to a slump towards September’s low near $1,721. During the fall, the 200-SMA level of $1,806 and $1,760 may offer intermediate halts. Alternatively, an upside break of $1,848 will lure buyers but an upper line of the wedge, around $1,851, may test the run-up towards the $1,900 threshold. Also acting as upside filters are the tops marked in November and March months of 2021, respectively around $1,877 and $1,916. On a fundamental side, the Fed is widely anticipated to hint for March rate hikes and balance-sheet normalization amid inflation fears. That said, a slight disappointment is enough for gold to rally towards $1,900 but the bears are so far trying to battle bulls amid hawkish hopes. Hence, it’s better to wait for the actual outcome.
OANDA:XAUUSDShort
by MTradingGlobal
PART 1/2 Connecting the dots: QE, MMT and inflation Inflation is a tough one to get your head around, and QE, MMT and fiscal spending is popular terms these days. I will try to connect the dots short and sharp in two posts. I’ll use gold as an inflation metric, i.e. higher gold price equals higher inflation. First, "inflation is always and everywhere a monetary phenomenon", Milton Friedman once said. There are many inflation terms (e.g. cost pull and demand pull), but in terms of Friedman, real inflation must come from a rise in money. Where do money come from? The only entity that can print US dollars is the US government, but do US dollars have to come from the government? During the great inflation, government spending was low, but the effective Federal funds rate went from 3% to almost 20% in order to deal with the inflation. If government spending was low, and interest rates (IR) was high, how could the money be flooding the streets? The answer is the private banking system. QE are bank reserves the private banks CAN use in order to make new loans (US dollars). I write can in capital letters, because that’s the important point. If the private banks don’t use the banks reserves to make new loans, every single dollar of bank reserves printed by the Federal Reserve never enter the real economy, and, hence, can’t be inflationary. Bottom line: QE can be inflationary but is NOT as long as the private banks don’t want to take on more risk and make new loans (US dollars). If the private banks can’t make the US dollars needed, MMT is a popular solution these days. MMT brings the money creation from the private banks back to the US government. If MMT is a good or a bad idea is not the purpose of this post, but put simple, this is what you need to know: MMT is a response to the private banks not making sufficient US dollars the global economy (USD = world reserve currency) needs in order to grow. Summary: QE is potentially inflationary but it’s not as long as the private banks don’t use the bank reserves to make US dollars. MMT is the response to the insufficient flows of US dollars from the private banking system.
FRED:FYFSD
by eirikb007