Hedge Fund Blogs From HedgeCo.Net


Fed Discount Rate Increase Exposed, Gold’s Anomalous Strength

A maelstrom of misinterpretation dominates the financial media outlets today in regards to last night’s Fed action.

Click here for my audio post on the recent decision by the Fed to increase the discount rate.

After listening to the above post, Gary Rosenthal had the following comments on the Fed move:

1) Federal Reserve banks currently have a record high of $1.14 Trillion of excess reserves on deposit with the Fed. Thus, an increase in the discount rate is meaningless because the banks have no need to borrow and will not be borrowing for a very long time.

2) Therefore, we believe raising the discount rate at this point was merely a ploy to strengthen the US$ in advance of a major Treasury auction next week.

3) Note the anomalous strong behavior of Gold during the last 72hrs in the face of overwhelmingly “bearish” news: IMF announces further Gold sales, Fed increases discount rate and Gold Feb. futures/option expiration next week.

About Bret Rosenthal

Interpreting the news that moves markets. Principal of RCM, LLC, and founding partner of the Fortune's Favor Family of Funds
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