Gold price holding onto gains for the week as the Fed starts 4 year old liquidity program
Yesterday we pointed out that it seemed that the powers that be have deemed the rest of August ‘beach time’. We appear to have got confirmation of this yesterday when the US stock market recorded trading volumes some 20% lower than the year-to-date average.
In terms of the gold price, the gains made yesterday at the start of the week seem to be holding today.
For £ gold we got the highest close in 8 trading days, closing above that £1030 level.
Gold £:
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For $ gold the price is still holding above the $1600 level – but as you can see from the chart below the trading range that gold has been in since May is still very much in place – it would take a close above $1630 with conviction to signal that trading range is broken.
Gold $:
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In terms of € gold we’re still hovering around the €1300 level – nearly 8% higher on the year.
Gold €:
(click for sharper image)
However, despite all the calm on the surface of this August market, things are clearly far from ‘fixed’. Today the Fed started up an old liquidity injecting program, one that they haven’t used in 4 years. From the Fed:
In November 2009, the Federal Open Market Committee (FOMC) authorized the New York Fed to undertake reverse repurchase transactions (reverse repos) for the purpose of testing operational readiness. The New York Fed has undertaken several such transactions, each one announced on the Markets section of the Bank’s website.
At its meeting in June 2012, the FOMC amended the Authorization for Domestic Open Market Operations to authorize the New York Fed to undertake certain open market transactions—outright purchase and sale of securities, and repos, in addition to reverse repos—for the purpose of testing operational readiness.
As such, beginning Friday, August 3, the New York Fed intends to conduct a series of small-value repos using all eligible collateral types. The repos will be conducted only with the primary dealers. The New York Fed has not conducted a repo since December 30, 2008. Since that time, there have been several system changes, changes to support triparty reform and six primary dealers have been added.
Like the earlier reverse repo operational readiness exercises, this work is a matter of prudent advance planning by the Federal Reserve. The operations have been designed to have no material impact on the availability of reserves or on market rates. Specifically, the aggregate amount of outstanding repo transactions will be very small relative to the level of excess reserves, and the transactions will be conducted at current market rates.
Today the Fed announced that this program had started with a $600m operation – So don’t let this summer quiet fool you, behind the scenes, quietly and almost unnoticed the Fed is back to its old tricks of trying to goose the market by providing more ‘liquidity’ – the real take-away of which is that the some 4 years after using this ‘emergency’ program the Fed is back using it again. Fixed? Far, far from it.
Related posts:
- Gold price rises this morning as the BoE starts its money printing program
- Gold price starts the week higher but is still rangebound
- Gold price starts the week higher as Spain’s problems come into focus
- Silver price holding steady above $30 – now up 10% on the year
- Gold Gains Last Week as Dollar Falters
Link to this article: : http://www.goldmadesimplenews.com/gold/gold-price-holding-onto-gains-for-the-week-as-the-fed-starts-4-year-old-liquidity-program-7557/
Posted by Declan Cosgrove on Aug 7 2012. Filed under Gold News.
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