Gold awaits Fed results; QE4 by year end?

Gold awaits Fed results; QE4 by year end? by Michale J Kosares for USA Gold

Precious metals remained in a holding pattern this morning in advance of today’s Fed statement and press conference.  Gold is priced at $1467 – up $3 on the day.  Silver is level at $16.67. Financial markets also have an eye on the British election tomorrow and the China tariff decision due on Sunday.  CNBC says that the Fed will signal that it remains neutral on rates for now and “will do whatever is necessary to keep liquidity high and overnight lending rates steady at the end of the year.”

Financial markets are becoming increasingly nervous about the lack of liquidity in the overnight repo market. Credit Suisse’s Zoltan Pozsar, who is generally regarded as a top expert on that market (in fact one of its inventors), says in a report issued on Monday, that “If we’re right about funding stresses, the Fed will be doing ‘QE4’ by year-end.” He goes on to deliver a warning: “If carry makes the world go ‘round, and reserves make carry possible……the day we run out of reserves would be the day when the world would stop spinning. No, this is not an overstatement.” In reading Pozsar’s analysis, one cannot help get the uneasy feeling that we might be right back where we were in 2008 – with the same options on the table.

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