Gold: woe one says QE4

The gold price yesterday was able to practically make up for the previous day’s losses. The precious metal received support – albeit involuntarily – from Fed Chairman Jerome Powell. The central banker announced that the US Federal Reserve will soon inflate the balance sheet again. However, this is not to be understood as a QE programme that the US Federal Reserve has launched during the crisis.

It is true that there could be purchases of bonds again. But this cannot be compared with the programmes of the time. The US Federal Reserve wants to announce more details in the coming days. Even if Powell doesn’t want to hear it, everything he says reminds us of the Quantitative Easing Programmes 1 to 3 that the US Federal Reserve launched after the Lehman bankruptcy. QE3 officially ended in October 2014, and the first interest rate hike took place in December 2015. The central bank has tried to shrink the bloated balance sheet in recent months, but abandoned this plan in September. Now there seems to be an about-face. The exit from the ultra-loose monetary policy thus does not seem to be quite as easy as some people thought.

Now you can call the new programme what you want. The Fed will have no interest in calling it QE, as President Donald Trump has called for it on several occasions. But de facto there is much to suggest that this is exactly what the Fed is about to issue. The big question is now: Do the markets again believe that the central bank can solve all problems with new cheap money, or is mistrust gradually growing?

The gold price seems to want to end its correction, which has been going on for a little more than a month. A breakout from the bullish flag outlined yesterday would be a first indication that the bulls are taking command again. Until then, some caution is needed. As before, a dive in the direction of 1,440/1,420 dollars cannot be ruled out.