Gold vs Fed Balance Sheet Expansionism

In less than one month, the Federal Reserve expanded its balance sheet over $184 billion in fiat Federal Reserve Notes.

Yesterday, Federal Reserve Chairman Jerome Powell acknowledged that more financial bailouts of Wall Street are oncoming.

He blurted, “…my colleagues and I will soon announce measures to add to the supply of reserves over time.”

And: “As we indicated in our March statement on balance sheet normalization, at some point, we will begin increasing our securities holdings to maintain an appropriate level of reserves. That time is now upon us.” 

Gone but not forgotten are the lies that the quantitative tightening program was going to bring the Federal Reserve central bank's balance sheet back into a pre-2008 crisis line.

Forget that tightening cycle that almost broke the US stock market in late 2018.

Nope, the Fed is not only going to keep cutting interest rates (low real interest rates are good for gold prices historically) but also has recently added a quantitative expansion effort to stave off a nasty recession or potential financial crisis to come.

Fed Balance Sheet 2003 - 2019

This September 17th, 2019, the Fed began lending hundreds of billions of dollars a week intervening in the repurchase agreement (repo) markets, extending revolving loans to major Wall Street primary security dealers.

Why all this is all happening on such major scales remains a mystery. The Fed is doing a terrible job of explaining itself while demanding those listening not to call the latest bailout-ism QE4.

Now and at least until November 4th, 2019, the NY Fed will be offering repo market participants an additional $310 billion cumulatively in term loans (most for 14-days at a time) as well as providing at least $75 billion daily in overnight loans.

At the Federal Reserve's current rate of new balance sheet expansion, they will double (2X) their now near $4 trillion USD balance sheet by June 2021.

Given the building baby boomer retirement crisis, we now face through 2030, and the massive unfunded pension crisis is soon coming home to roost.

Perhaps merely doubling the Fed balance sheet will not be enough to Japanize our way through the financial mess we have built.

Gold vs. Fed Balance Sheet 

Gold vs Fed Balance Sheet SD Bullion

While the correlation between a rising gold price and the expansion of the Federal Reserve balance sheet is not perfect.

Yet as QE forever becomes more apparent and evident to current financial market participants, the run to a new nominal historical gold price high and likely eventual new silver price highs to follow is indeed very reasonable.

Stocks vs. Fed Balance Sheet 

Stocks vs Fed Balance Sheet vs S&P 500 SD Bullion

The correlation between a nominally rising US stock market and the expansion of the Federal Reserve balance sheet appears very correlated with a slight lag in time.

It remains seen if this latest injection of over $184 billion fiat US dollars will help bring the US stock markets to new nominal price highs.

Or might current record-sized corporate indebtedness finally come home to roost?

For as loud as recent new nominal price highs have been in the US stock market, gold appears ready for the eventual rollover in the stretched US stock market. 

The gold measured dead cat bounce from the early 2000 stock market bubble peak, appears ready to fall moving into the 2020s and beyond.

We have spoken with gold price forecasting experts who maintain that gold and silver should remain great asset classes not merely the next decade (the 2020s) but also even in the decade to follow (the 2030s).

Gold vs stocks S&P 500 SD Bullion

In the next eventual rollover of gold values versus US stock values, will we ultimately revisit the 1980 low point of below 0.2 oz gold to buy the S&P 500 nominally?


All this recent Fed balance sheet expansionism has and will likely retard the inevitable answers.

Come what may, the Fed has restarted its balance sheet expansionism. The value of gold historically ultimately accounts for such market manipulations. 

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Thank you for visiting with us here at SD Bullion.


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James Anderson
James Anderson
Content Director

A bullion buyer years before the 2008 Global Financial Crisis, James Anderson is a grounded precious metals researcher, content creator, and physical investment grade bullion professional. He has authored several Gold