Federal Reserve's De Facto QE? Secretly Buying U.S. Treasuries, These Types of Assets May Benefit the Most

The Federal Reserve recently completed a "covert operation"—quietly purchasing $43.6 billion in U.S. Treasury bonds. On May 8 alone, it bought $8.8 billion in 30-year long-term U.S. Treasuries, with another $34.8 billion purchased earlier last week.

Some analysts have provided a more cautious interpretation: the Federal Reserve has not officially labeled this as QE; they are merely reinvesting the principal of maturing bonds to avoid a rapid shrinkage of the balance sheet.

In response, analysts pointed out that technically this is correct, but buying bonds is still buying bonds, regardless of the label attached. Such a quiet return to quantitative easing (QE) is not typical for the Federal Reserve, and the scale of U.S. Treasury purchases is not small. The Federal Reserve's actions represent a form of "invisible easing."

Some traders have already noticed this, and savvy investors should as well; commodity traders are particularly sensitive to this monetary "sleight of hand."

Gold Only Believes in Numbers

Goldman Sachs data shows that in March this year, global central bank demand for gold was strong, purchasing 64 tons of gold, with China once again becoming the largest identifiable buyer, 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.

Analysts pointed out that the actions of global central banks convey the message: holding U.S. Treasuries now increasingly resembles playing roulette in a burning casino rather than a sound investment. Central banks around the world are doing this. 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

One analyst described it this way: Bitcoin is a response to the distrust of central banks by crypto investors; while gold is due to the mutual distrust among central banks.

Bitcoin is that "back-alley asset that respectable investors pretend not to go to." The reasons for Bitcoin's rise include: skepticism towards central banks and their fiat currencies; having experienced 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.

Analysts noted that if the Federal Reserve continues to "secretly" press the QE button, Bitcoin may become the "midnight convenience store burrito" of the investment world—volatile but satisfying.

Positive for Emerging Markets

The Federal Reserve's "latest actions" may also be beneficial for certain 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 the iShares Latin America 40 ETF (ILF) have risen approximately 24%. Analysts pointed out that this highlights strategic allocation aimed at benefiting from a weaker dollar and rising commodity prices.

Major Moves Ahead?

Analysts suggest that the Federal Reserve's "quiet actions" may signal that major market movements are imminent. Although gold, Bitcoin, and the Latin American markets have already seen good gains, the Federal Reserve's quiet return to QE signals that these upward trends may still accelerate further Although QE usually boosts U.S. stocks, in the current context of declining trust in the U.S. dollar and escalating geopolitical tensions, gold, Bitcoin, and Latin American markets may be the true "storm shelters" with greater safe-haven value and profit potential.

Risk Warning and Disclaimer

The market carries risks, and investment should be approached with caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment based on this is at one's own risk