The Fed’s Balance Sheet: What you Need to Know

The Fed plans to reduce bond holdings and increase interest rates in 2022. History tells us gold is one of the strongest assets in this environment.

Key Takeaways:

  • Yesterday’s FOMC meeting minutes signaled another hawkish pivot toward interest rate increases and deleveraging, or reducing the value of bonds held by the Fed.
  • Stocks, bond prices, and gold all took a hit. The S&P 500 was down 2.38%. The tech-heavy Nasdaq 100 was down almost 4%.
  • Gold’s most recent breakout began in August 2018, right in the middle of the Fed’s last bout of deleveraging. Could history repeat itself in 2022?
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The Fed: stuck between an inflationary rock and a debt-ridden hard place

The U.S. central bank tries to tame persistent inflation without sacrificing the rampaging and uniquely fragile stock market.

Key Takeaways:

  • Options trading volume has reached the highest level in history, as more and more market participants pile in risk in exchange for outsized returns.
  • Although the CPI registered a lower reading in August than it did in July, inflationary pressures in housing, shipping, and retail show few signs of slowing down.
  • Gold slid down to $1,720/oz this week as the U.S. dollar rallied and bond yields jumped.
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