Recently, the Fed completed a 'covert operation'—silently purchasing $43.6 billion of U.S. Treasury bonds. On just May 8, it bought $8.8 billion of 30-year long-term U.S. bonds, with another $34.8 billion purchased earlier in the week.
Some analysts have offered more cautious interpretations: the Fed has not formally called this QE; they are simply reinvesting the principal of maturing bonds to avoid a rapid shrinkage of their balance sheet.
In response, analysts point out that technically this is not wrong, but buying bonds is buying bonds, regardless of the label attached. Such a quiet return to quantitative easing (QE) is not typical Fed behavior, and the scale of U.S. bond purchases is not small. The Fed's actions represent a form of 'invisible easing.'
Some traders have already noticed this, and astute investors should too; commodity traders are particularly sensitive to this monetary 'sleight of hand.'
Gold only believes in numbers.
Goldman Sachs data shows that global central bank demand for gold was strong in March this year, buying 64 tons of gold, with China becoming the largest identifiable buyer again, purchasing 30 tons in March. Year-to-date, global central bank demand has averaged 94 tons per month, far exceeding the previous forecast of 80 tons.
Analysis indicates that the signals conveyed by the operations of global central banks are: holding those U.S. bonds is increasingly resembling playing roulette in a burning casino, rather than a sound investment. Central banks around the world are doing just that. The U.S. itself has also imported a large amount of gold. Countries are preparing for the next round of drastic changes in the global monetary landscape. Gold has surged significantly since early 2024 because gold only believes in numbers.
Bitcoin has also responded.
Some analysts describe it this way: Bitcoin is distrusted by crypto investors towards central banks; while gold is distrusted among central banks themselves.
Bitcoin is that 'back-alley asset that respectable investors pretend not to visit.' Reasons for Bitcoin's rise include: skepticism towards central banks and their fiat currencies; experiencing a halving a year ago, entering a typical four-year bull market cycle; a noticeable shift in the Trump administration's attitude towards cryptocurrencies; and inflows of institutional and retail funds into Bitcoin ETFs, further solidifying Bitcoin's status as a mainstream financial asset.
Analysis suggests that if the Fed continues to 'sneakily' press the QE button, Bitcoin might become the investment world's 'midnight convenience store burrito'—highly volatile but satisfying.
Favorable for emerging markets.
The Fed's 'latest move' may also be favorable for some emerging market assets. Countries rich in resources and holding physical assets, such as those in Latin America, are among them. Since the beginning of this year, the iShares MSCI Brazil ETF (EWZ) and iShares Latin America 40 ETF (ILF) have both risen by about 24%. Analysis indicates that this highlights strategic allocation aimed at benefiting from a weakening dollar and rising commodity prices.
Big moves coming soon?
Analysts say the Fed's 'quiet move' may signal that big market actions are imminent. Although gold, Bitcoin, and the Latin American market have already seen good gains, the Fed's subtle return to QE indicates that these upward trends may still accelerate further.
Although QE usually boosts U.S. stocks, in the current context of declining trust in the dollar and increasing geopolitical tensions, gold, Bitcoin, and the Latin American market may truly be the 'storm refuges' with greater safe-haven value and profit potential.
