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What Does A $4 Trillion Fed Balance Sheet Mean For Gold And Oil

Tyler Durden's picture


Earlier we explained why Bernanke's actions today mean that the Fed Balance Sheet will likely grow to over $4 trillion by the end of 2013. Critically this flood of liquidity will raise the nominal price of every asset (from whimsical pieces of stockholder paper to barbarous relics and black gold). Some of these assets, like stock prices and high-yield credit spreads do have point-in-time 'value limits' to their price - though at times it seems a dream that fundamentals would ever matter again; but some have less of a binding constraint - such as gold. Should the Fed proceed, as seems likely, and do its worst/best to blow its balance sheet wad then we estimate Gold will be priced at least $2250 per ounce by the end of 2013 (of course higher if the Fed sees no evidence of recovery). Meanwhile, deeper underground, the world's mainstay source of energy, WTI Crude oil, could jump to record highs over $150 per barrel (which just happens to coincide with the 'pegged' value of oil in gold). It will be interesting indeed to see how the world's socio-economic infrastructure hangs together should that occur - can't happen? Different this time? Indeed it is now that Ben hit the big red 'panic' button.


Gold vs Fed and ECB balance sheets... notably for QE2, gold priced in all the Fed balance sheet expansion within around half the period (around six months from Jackson Hole) and then overshot - this would infer we see Gold $2250 around the end of the first quarter next year - and expect some overshoot...


Oil vs Fed balance sheet... (which fits nicely into the 0.07 oz of Gold per barrel 'peg' that seems to have been 'agreed' with the world's oil producers).


Charts: Bloomberg

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Thu, 09/13/2012 - 21:50 | 2793116 Aziz
Aziz's picture

Now this is the kind of dip where I can say BTFD.

Thu, 09/13/2012 - 21:59 | 2793145 NewThor
NewThor's picture

Ben Bernanke is the anti-christ.

Thu, 09/13/2012 - 22:12 | 2793185 Dr. Engali
Dr. Engali's picture

No Obama is the anti Christ. Ben is the false profit. (spelled that way intentionally ... Think about it)

Thu, 09/13/2012 - 22:41 | 2793278 NewThor
NewThor's picture

reappointed by obaMABUSh appointed him.

Nostradamus said anti-christ 3 would be Mabus the duke of prints.

Thu, 09/13/2012 - 23:21 | 2793342 TwoShortPlanks
TwoShortPlanks's picture



This isn't QE3...this is QEi5

Everyone needs to understand as to the REAL REASON why QE3 was launched last night....APPLE!!!!

Bernanke's focus was on Market/Public sentiment...yeah?

Think about it. If this week's launch of the iPhone5 were to fail and not meet and/or exceed sales targets, THAT  ladies and gentlemen, would potentially be the rudest awakening to the Western World, that we really are in a Global Recession, bigger than anything else! Food & Oil can go up in price, but don't fuck with our toys.

Apple's revenue contributes to what percentage of the US GDP figures, and how much of Apple's revenues are attributable to iPhone sales??? (Rhetorical, I know the stats).

iPhone sales affect both GDP numbers and sentiment.

iPhone (Apple) has a greater effect on Market/Public sentiment than any other factor.

After FaceBook went FacePlant and then FaceEgg, there was no way in hell Apple was going to be allowed to go the way of the Lawn Dart.

It's Extend and Pretend via the iPhone5 vehicle…It's that fucking simple.

QEi5 lives!

Thu, 09/13/2012 - 23:28 | 2793413 Manthong
Manthong's picture



I pledge allegiance to the fruit
Of the United States of America.
And to the iPhones for which it stands.
One pie, under Obama , fundamentally transformed,
With slices, of wealth to spread around, for all.

Fri, 09/14/2012 - 01:54 | 2793620 Michael
Fri, 09/14/2012 - 03:15 | 2793682 Michael
Michael's picture

Tony Blair Appointed Senior Advisor to JPMorgan Chase

Tony Blair Confronted At Leveson Inquiry


Fri, 09/14/2012 - 05:48 | 2793775 smlbizman
smlbizman's picture

i think a more disturbing comment from big ben was that new home sales help the economy....and i will finish his thought...so congress you guys must reward people that buy new and punish those that want to buy existing....

Fri, 09/14/2012 - 07:51 | 2793910 GetZeeGold
GetZeeGold's picture



punish those that want to buy existing


Tisk tisk.....those people must be po.


You know you're poor when you can't afford the "or".


Thu, 09/13/2012 - 23:03 | 2793354 johnQpublic
johnQpublic's picture

how is the antichrist described in hebrew language?

in case you didnt know, phoenetically....








no shit...look it up

Fri, 09/14/2012 - 08:13 | 2793950 Obadiah
Obadiah's picture

It maybe spelled that way, but it would be just another ruse.


The antichrist will "Look, act and have the whole world believeing that he IS the Christ." lightning from his fingertips and amazing majikal tricks. O aint got that kind of powa.

Fri, 09/14/2012 - 08:15 | 2793955 TheDriver
TheDriver's picture

You know that the anti-christ is strictly a Christian construct, right? You also know that the translation to which I believe you're referring has no grounds in the reality of ancient Hebrew or Greek right?

I have no love for the man as a leader but let it go man. You're just making yourself look stupid when you say shit like this.

Thu, 09/13/2012 - 23:07 | 2793363 stocktivity
stocktivity's picture

I'm confused. Ben prints to infinity until unemployment goes down...inflation will no doubt rise...wages won't....people will have less money to spend with prices rising...companies will do worse....they won't hire and will probably let workers go...Ben prints to infinity until unemployment goes down. Sorry folks....It's (still) all Bullshit!

Thu, 09/13/2012 - 23:39 | 2793440 MiltonFriedmans...
MiltonFriedmansNightmare's picture

It's part of the plan...accelerate the destruction of the middle class....they know what they are doing.

Fri, 09/14/2012 - 03:56 | 2793721 AldousHuxley
AldousHuxley's picture

middle class can hedge themselves by buying betting the house  on call options....apartment living only for few years.

Fri, 09/14/2012 - 06:39 | 2793792 Chain Gun Smoke
Chain Gun Smoke's picture

Da Fuq?

Fri, 09/14/2012 - 07:27 | 2793868 A82EBA
A82EBA's picture

lol damn..   :))

Fri, 09/14/2012 - 09:12 | 2794235 Free Markets
Free Markets's picture

And I think the only way I can take advantage of QE is to refinance my house.  that sure as hell wont make up for higher gas and food prices.  thank goodness core inflation is steady otherwise I would feel the dollar devaluing.  Sarcasm ON!  Meanwhile my buddy who is a money manager will be taken to the Ryder Cup and schmoozed.

Thu, 09/13/2012 - 23:46 | 2793445 dbomb12
dbomb12's picture

This is not about the economy, it is about cheap money for bankers to rake in more profits until prices go so high the whole thing WILL collapse that is the plan the eventual devaluation of the dollar

Remarks by Governor Ben S. Bernanke
Before the National Economists Club, Washington, D.C.
November 21, 2002

"Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly."

Any Doubts???

Fri, 09/14/2012 - 00:27 | 2793530 RmcAZ
RmcAZ's picture

And don't forget, rates at zero which ruins savers.

Fri, 09/14/2012 - 07:37 | 2793873 A82EBA
A82EBA's picture

I personally dont believe the banks are here to be my daddy and give me a nice return on my deposits. I have the option of keeping it under my mattress along with the risk. There are better ways to invest. The lazy way is no longer profitable..lets get over it already.

Fri, 09/14/2012 - 01:29 | 2793549 vast-dom
vast-dom's picture





Faber contrarian on gold moves and bullish equities¿¿¿¿¿¿¿¿¿:




Thu, 09/13/2012 - 22:53 | 2793323 Zgangsta
Zgangsta's picture

I see what you did there.

Fri, 09/14/2012 - 00:21 | 2793519 Bernankenstein
Bernankenstein's picture

I think of myself more as the "Dollar Lama".

Thu, 09/13/2012 - 22:12 | 2793187 caimen garou
caimen garou's picture

he was trust from the bowels of the earth by the underworld

Thu, 09/13/2012 - 22:14 | 2793197 Cheesy Bastard
Cheesy Bastard's picture

Yup.  Chairsatan, couchsatan, ottomansatan, armoiressatan, and chifforobesatan combined.

Thu, 09/13/2012 - 22:27 | 2793240 Uber Vandal
Uber Vandal's picture


Thu, 09/13/2012 - 22:42 | 2793283 Cheesy Bastard
Cheesy Bastard's picture

The desk or the folding couch?  Actually that is a trick question, as both apply.

Fri, 09/14/2012 - 08:59 | 2794175 ZeroAvatar
ZeroAvatar's picture


Fri, 09/14/2012 - 00:11 | 2793499 Cathartes Aura
Cathartes Aura's picture


thanks for taking me back to one of my favourite childhood novels. . .  To Kill A Mockingbird.

where the hell is Atticus when you need him, or Boo Radley for that matter. . .


Thu, 09/13/2012 - 23:46 | 2793451 mt paul
mt paul's picture

anti economist ...

Thu, 09/13/2012 - 23:53 | 2793457 vast-dom
vast-dom's picture

yes. and i've been stating for while now that oil under $120 is rigged. $150+ is min in line with this idiocy easing going forward. i think gold could cross 2k very soon. 


and coupled with QEi, if Iran goes into play oil will go parabolic.

Fri, 09/14/2012 - 02:12 | 2793629 CrashisOptimistic
CrashisOptimistic's picture

Never ever forget that oil scarcity took the price to $150 in 2008, before Quantitative Ease was even in the lexicon.  There was zero printing that summer.  But there was scarcity as China ramped consumption for the Olympics and global supply could not match it.

There are almost 1/2 a billion more people now and the rate at which oil is coming out of the ground globally has not risen hardly at all.  

The point being, if we go to $150, a lousy $40 billion per month is going to explain a rather small part of that.  The big part is the relentless scarcity that drives drilling into deep ocean burning up effort and joules to get less and less out vs convenient on shore conventional drilling that requires nearly no effort.

This is forever.  There is no fix, certainly not more QE.

Fri, 09/14/2012 - 08:47 | 2794107 marathonman
marathonman's picture

Baloney, there were housing bubbles all over the freaking world.  Credit was expanding like crazy.  What is credit?  Money with counterparty risk.   With all that hot money, oil was bid up to $150 where it pricked the housing bubble because it sucked more money out of the people living hand to mouth on sub-prime loans and led to the collapse.

Thu, 09/13/2012 - 23:08 | 2793369 Yen Cross
Yen Cross's picture

I sold the top. ;-)

Fri, 09/14/2012 - 02:18 | 2793639 VonManstein
VonManstein's picture

your "contrarian indicator of the decade" wasnt so accurate was it though Aziz.. thought it was time to sell because open ended QE was priced in? Ye right!

Although Now we do have the "euphoria" you spoke of and we are going to new highs in everything.

Its quite scary actualy

Thu, 09/13/2012 - 21:50 | 2793119 Yellowhoard
Yellowhoard's picture

Gold bitchez!

Fri, 09/14/2012 - 07:40 | 2793880 samcontrol
samcontrol's picture

Never heard that one before on here...

RED ARROW ME all you want but i,m really bad at options and i need some HELP. I know talking trading here is off limits but prety PLEASE?

I have some PAPER gold products
GDX sold DEC 47.50 calls . HOW the fuck do i get my stock back without losing to much, what kind of rollover do you sugges? THANKS. .

Fri, 09/14/2012 - 09:03 | 2794196 LawsofPhysics
LawsofPhysics's picture

Sell paper, buy physical, buy call options for next year into the market rip...

then get popcorn and wait.

Thu, 09/13/2012 - 21:50 | 2793121 SGS
SGS's picture

So Canadian gas prices will be $8 a gallon.  Sweet. Maybe I'll just hijack a fuel truck.

Thu, 09/13/2012 - 23:46 | 2793450 adr
adr's picture

That did just happen the other day.

Thu, 09/13/2012 - 21:51 | 2793122 Hedgetard55
Hedgetard55's picture

May Bernanke rot in hell for eternity, but before that, may he contract colo-rectal cancer and die a slow and painful death. FUCKING THIEF.

Thu, 09/13/2012 - 22:39 | 2793273 masterinchancery
masterinchancery's picture

How about the treatment our Ambassador got in Libya--raped and tortured before being killed.

Thu, 09/13/2012 - 22:44 | 2793294 A Lunatic
A Lunatic's picture

Raped by Barbara Boxer, Dianne Feinstein, and Nancy Pelosi.........

Thu, 09/13/2012 - 22:47 | 2793302 chump666
chump666's picture

he was raped???


Thu, 09/13/2012 - 23:02 | 2793352 pods
pods's picture

Rape is a common thing tossed out because of the emotional value it has.

Remember Saddam's Rape Rooms?

Would bet that someone in an alphabet agency was the source for that one.


Thu, 09/13/2012 - 23:24 | 2793401 The Shootist
The Shootist's picture

Not suprised. Napoleon's troops who straggled behind the colomns were bum raped outside of Cairo circa 1799. They let the lads go who returned crying their eyes out and terribly shaken up.

Fri, 09/14/2012 - 00:08 | 2793492 hedgehog9999
hedgehog9999's picture

This is where the BUNGA  BUNGA joke came from, when I first heard it , it was from the jungles of Borneo..... but it is a middle east thing as evidenced by recent events....

Thu, 09/13/2012 - 23:29 | 2793417 chump666
chump666's picture

I think the Iranians were behind this, but rape?  Need proof, like a Reuters article or something. 

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