Quantitative Easing and Gold
Quantitative easing (QE) is when a central bank buys large amounts of government bonds and other securities to push down longer-term interest rates and support the economy. The Federal Reserve used it on a massive scale after 2008 and again in 2020, expanding its balance sheet many times over. Some people hold gold because they worry QE may weaken the dollar's purchasing power over time, but the actual relationship between QE and gold prices has been uneven and is debated by economists.
How QE Works
Normally, the Fed influences the economy by adjusting its target for short-term interest rates. When that rate is already near zero and the economy still needs support, the Fed can turn to large-scale asset purchases:
- The Fed buys Treasury securities and, at times, mortgage-backed securities from banks and dealers.
- It pays by creating bank reserves, electronic balances held at the Fed.
- Those purchases raise bond prices and lower long-term yields, which may reduce borrowing costs for mortgages and businesses.
- Lower yields can also encourage savers to move into other assets, supporting stock and property prices.
The reverse process, letting securities mature without replacing them, is often called quantitative tightening (QT). The Fed describes its policy tools on its monetary policy page.
The Fed's Balance Sheet in Numbers
FRED, the data service of the Federal Reserve Bank of St. Louis, publishes the Fed's total assets weekly (series WALCL). The broad shape is clear:
- Before 2008: total assets were under $1 trillion.
- 2008–2014: three rounds of QE following the financial crisis lifted the total to roughly $4.5 trillion.
- 2017–2019: a period of gradual runoff trimmed it somewhat.
- 2020–2022: pandemic-era purchases roughly doubled it to a peak near $9 trillion.
- From 2022: QT began reducing holdings.
Check FRED for current figures, since the balance sheet changes every week.
The Concern Some People Raise
Critics of QE argue that creating large amounts of new reserves could eventually fuel inflation, weaken the dollar, or inflate asset bubbles. Supporters argue that QE helped prevent deeper downturns and that much of the new money stayed as bank reserves rather than circulating. For a decade after 2008, consumer inflation stayed relatively low despite QE, which surprised many who had predicted otherwise. Inflation did surge in 2021–2022, though economists still debate how much of that was due to QE versus fiscal stimulus, supply disruptions, and energy prices.
Some people hold gold as a potential hedge against the possibility that monetary expansion may erode the dollar's purchasing power over the long run. Gold's supply cannot be expanded by central bank decisions, which is part of its appeal in that view. Our pages on gold and the U.S. dollar and gold and inflation explore those links.
What Gold Actually Did
Looking at the history, gold's behavior during QE episodes has been mixed:
- After the 2008 crisis and during the early QE rounds, gold rose strongly, reaching a peak in 2011.
- In 2013, when the Fed signaled it might slow its purchases (the "taper tantrum"), gold fell sharply, and it stayed well below its 2011 peak for several years even while the balance sheet kept growing.
- In 2020, as the Fed launched massive new purchases, gold climbed to new record highs.
- During QT from 2022, gold did not fall as some might have expected; it went on to set further record highs in later years, with central bank buying often cited as one factor.
That record suggests QE is one influence among many. Real interest rates, the dollar, central bank demand, and geopolitical events have also mattered a great deal. Our page on gold and interest rates explains why real rates often get the most attention.
Reading the Debate
When you see claims that "money printing" must send gold higher, or that QT must sink it, it is worth checking them against the data. FRED lets you chart the Fed's balance sheet alongside gold price series and inflation, and the World Gold Council's Goldhub publishes research on gold's drivers. The honest summary is that QE could influence gold through expectations about inflation, rates, and the dollar, but the effect has not been consistent.
Where Physical Metals Fit
For those who share the long-term concern about monetary expansion, physical gold and silver may be one way to diversify part of a portfolio away from assets denominated purely in dollars. It is best viewed as a long-term holding, not a trade on the next Fed announcement. See precious metals for diversification for how that may work.
Goldco is a precious metals company that offers gold and silver for direct purchase and self-directed retirement accounts. Our Goldco review explains its process and what to verify.
Frequently Asked Questions
Is QE the same as printing money?
Not exactly. QE creates bank reserves to buy securities; it does not directly put cash in people's hands. Its effect on the broader money supply depends on bank lending and other factors.
Does QE cause inflation?
It may contribute under some conditions, but the 2008–2019 period saw large-scale QE with relatively low consumer inflation. Economists continue to debate the link.
Why did gold fall in 2013 if QE was ongoing?
Markets reacted to signals that the Fed might slow purchases and that real interest rates might rise. Expectations often matter as much as current policy.
Where can I see the Fed's balance sheet?
FRED publishes it weekly as series WALCL, and the Federal Reserve posts its balance sheet data on its own website.