Daily Gold Market Report

Record Operating Loss for the Fed:
Interest Rate Hikes Lead to $114.3 Billion Shortfall

(USAGOLD – 3/27/2024) Gold prices are posting double digit gains early this morning. Gold is trading at $2190.38, up $11.58. Silver is trading at $24.55, up 9 cents. In 2023, the Federal Reserve experienced its largest operating loss ever, amounting to $114.3 billion, due to significantly elevated interest expenses, which forced it to halt remittances to the Treasury. The central bank’s interest expenses surged to $281.1 billion, nearly tripling from the previous year, while its interest income from its asset portfolio decreased slightly to $163.8 billion from around $170 billion in 2022. This financial situation arose as the Fed raised interest rates starting in March 2022 to combat inflation, leading to increased interest payments to banks for excess reserves, which reached a record $176.8 billion. To manage the shortfall, the Fed issued a “deferred asset” to the Treasury, which grew to a record $133.3 billion and has no impact on its monetary policy conduct.

USAGOLD Comment: The combination of potential lower interest rates, central bank demand, gold’s status as a safe-haven asset, its role as an inflation hedge, and market sentiment all contribute to a favorable environment for gold prices.