Gold Prices Fall as Fed Balance Sheet Hits $8 Trillion, Reverse Repo Surges
GOLD PRICE OUTLOOK:
Gold prices pulled back for a second day as the DXY US Dollar strengthened
Demand for Fed’s reverse repo facility surged to an all-time high, hinting at excessive liquidity conditions that support the case for tapering
The Fed balance sheet hit a record $8 trillion. A slowdown in the pace of expansion may undermine the yellow metal
Gold prices extended lower during Monday’s APAC session after falling 1.14% on Friday, as the US Dollar climbed alongside longer-dated Treasury yields. Demand for the Fed’s overnight reverse repo facility (ON RRP) surged to a record high of $547.8 million on June 11th (chart below), reflecting swelling liquidity at financial institutions. A reverse repo happens when a central bank sells securities and raises cash from the markets in order to provide stability in lending flows. It usually happens when there is too much liquidity (cash) and demand for interest-bearing securities rises.