The Real Story Behind the Fed’s Moves and Gold Market Volatility

The Fed’s balance sheet, a key indicator that often goes overlooked but holds crucial clues about the broader economy and inflation.

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In this episode of the Money Metals Midweek Memo, host Mike Maharrey dives deep into the Federal Reserve’s monetary policy, the ongoing trade war, and the gold market’s volatility.

With interest rate speculation dominating headlines, Maharrey urges listeners to shift their focus to the Fed’s balance sheet, a key indicator that often goes overlooked but holds crucial clues about the broader economy and inflation.

Stop Watching the Puck: Why the Balance Sheet Matters More Than Interest Rates

Maharrey, a longtime hockey fan, likens the market’s obsession with Federal Reserve interest rate policy to following the puck in a game—if you only focus on one thing, you miss everything else that shapes the bigger picture.

While interest rates do impact borrowing costs and economic growth, they are just one part of the Fed’s monetary strategy.

Instead, Maharrey urges listeners to pay closer attention to the Fed’s balance sheet, which reflects the actual money supply and the Fed’s quantitative easing (QE) and tightening (QT) actions. The balance sheet is where real monetary inflation happens, which ultimately drives price inflation.

Since the 2008 financial crisis, the Fed’s balance sheet has ballooned from $900 billion to nearly $9 trillion—a massive increase that fueled asset bubbles and devalued the dollar.

Gold Market Chaos and Rising Tariffs: What’s Driving Volatility?

The past week saw significant turbulence in the gold market. On Friday, gold prices dropped to $2,857 per ounce, breaking below the key $2,900 support level. However, by Tuesday, gold rebounded to $2,929, showing the volatility that has defined recent weeks.

The primary driver of this turbulence?

Tariffs.

After months of threats, the trade war officially escalated this week, with the U.S. imposing tariffs on Canada and Mexico, prompting immediate retaliatory measures. Markets hate uncertainty, and gold—often seen as a safe haven—has reacted accordingly.

Adding to the instability is a massive movement of gold from London to New York, as big institutions seek to profit from price discrepancies caused by tariff fears. The latest data shows that nearly 800 tons (over 25.7 million ounces) of gold have shifted to New York vaults—numbers not seen since the early pandemic years.

Meanwhile, market volatility isn’t limited to gold. The VIX volatility index has surged 54% since February 19, and stocks took a major hit this week as investors grapple with economic uncertainty.

The Fed’s Silent Move: Balance Sheet Reduction Slowing Again

While mainstream media focuses on whether the Fed will cut interest rates, Maharrey points out a more significant shift: The Fed has already been easing its monetary policy since June 2024 by slowing the pace of balance sheet reduction.

Most assume the Fed’s easing began in September 2024, when it cut rates by 50 basis points. However, the real shift started much earlier.

By reducing the speed at which it shrinks its balance sheet, the Fed has effectively been injecting more liquidity into the financial system—contradicting its supposed fight against inflation.

Now, new reports indicate the Fed may further slow or even halt balance sheet reduction in response to government debt concerns.

With the federal government hitting its debt ceiling in early 2025, the U.S. Treasury is using “extraordinary measures” to keep the government running. But if the Fed continues reducing its balance sheet, it could pull too much liquidity out of the system, exacerbating financial instability.

Key takeaway: The Fed faces a no-win scenario. It needs to keep shrinking the balance sheet to fight inflation, but doing so risks destabilizing markets and making government borrowing more difficult.

The Bigger Problem: Inflation Isn’t Going Away

Despite four consecutive months of rising CPI numbers, the Fed continues to make moves that increase monetary inflation rather than fight it.

Since October 2023, the M2 money supply has increased, reaching $2.56 trillion in January 2025, its highest level since January 2022.

More money in the system means continued devaluation of the dollar and, ultimately, rising prices.

Former Federal Reserve Governor Kevin Warsh pointed out that since the pandemic:

• The monetary base is up 60%

• M2 money supply has risen 36%

• Cumulative price inflation has increased 22%

With this much money still circulating, inflation isn't going anywhere—no matter what the Fed says.

Gold and Silver: The Best Protection Against Monetary Chaos

Maharrey closes the episode with a clear message: Gold and silver remain the best hedge against the coming monetary storm.

• The Fed is likely to slow or halt balance sheet reduction, which will inject even more liquidity into the system.

• Market volatility is rising, with stocks, gold, and the dollar all swinging unpredictably.

• The Federal Reserve is boxed in—unable to fight inflation without triggering an economic collapse.

In this uncertain environment, owning physical gold and silver is a crucial step for preserving wealth.

With current price volatility, investors should watch for dips and use them as buying opportunities before gold prices move higher in response to renewed inflation concerns.

For those interested in acquiring physical metals, Maharrey recommends calling Money Metals Exchange at 800-800-1865 or visiting MoneyMetals.com to explore options and speak with a precious metals specialist.

Final Thoughts

The Fed’s actions speak louder than words.

Despite hawkish rhetoric about fighting inflation, its moves on the balance sheet suggest it is preparing to accommodate more government spending and debt issuance—even if it means fueling more inflation.

For savvy investors, this means one thing: Gold and silver are more important than ever.

Stay informed, watch the markets, and position yourself accordingly.

Tune in next week for more insights on sound money, economic trends, and the latest in the precious metals market.

Originally Published on Money Metals.