As investors get bombarded with earnings story after earnings story from top tech companies racing to get ahead in the AI race, behind the scenes and away from the spotlight, attracting virtually zero attention, the Federal Reserve quietly injected almost $30bn into the banking system, conducting its largest operation since 2020.

The central bank quietly injected $29.4billion into the banking system, through overnight repurchase agreements, trading is a sense, treasuries for cash in the form of short-term loans, with the move raising eyebrows and speculations that the system is under pressure after years of quantitative tightening, which bottlenecks liquidity in markets. US banking reserves have plunged to around $2.8 trillion to their lowest levels in four years.

The move appears contradictory in terms of what the Chair of the Reserve states at post-interest rate press conferences and what the institution does behind closed doors, creating a mysticism surrounding the central bank’s operations, fuelling speculations.

So far Chair Powel broadcasted time and time again the need to be data dependent and keep policy restrictive enough to squash inflationary pressures, and now that inflation appears to be under the spell of the Reserve practices, contained round and about the 2% level, the door for more easing is open yet the narrative does not appear to be decisively in favour of more cuts for the time being.

The central bank has embarked on its journey towards looser financial conditions by slashing the policy rate three times so far in 2025, yet federal funds rates are seen as excessively high from markets and the longer they stay there, odds for something breaking rise, hence the calls for further easing.

In October JP Morgan CEO Dimon warned about the cockroaches in the substructure of the US banking sector after financial institutions declared bankruptcies and small-medium sized banks declared large bad loan losses. Could this quiet injection of liquidity from the Fed in the past week be about these culprits or the expectation that more could possibly follow?

Technical Analysis

XAUUSD Chart Gold enters consolidation mode near $4000 mark as profit taking activity dwindles

Resistance: 4030 (R1), 4150 (R2), 4250 (R3)
Support: 3890 (S1), 3780 (S2), 3685 (S3)