The Fed managed to reduce its balance sheet by $45 billion last month. The majority of this was in Treasuries of 1-5 year maturities with a reduction of $55B. The next biggest reduction was in mortgage-backed securities MBS totaling $20 billion. This fell short of the target of $35 billion. In fact, the Fed has still never reached its MBS target since balance sheet reduction began.
Meanwhile, the central bank continues to add bank bailout loans to its balance sheet.
Seasonally Adjusted Money Supply in May increased $131B. This is the first growth in adjusted M2 since last July and the largest increase since December 2021.
With a hawkish Fed and dollar strength, gold has dropped below $1,950 an ounce, but the technicals appear to indicate that we are at or near the end of a correction.
The technical analysis last month was published when gold was around $1975 and concluded:
The indicators are now mostly neutral with a bearish lean. There are some slightly bullish indicators, but nothing strong enough to give a clear signal. This suggests the price could drift lower until it finds the right catalyst to reverse. There should be plenty of catalysts on the horizon, but the biggest one will be how the Fed responds to the next crisis. Until then, pressure is pointing downward.
That conclusion has been accurate over the last month as the price has drifted lower with any rallies being sold.
June is wrapping up strong for gold at the COMEX with 20,101 contracts being delivered. There are still 583 contracts open that have not been delivered, but the majority of the contracts have been completed. Meanwhile, were seeing more and more stress on silver and platinum.
The bleed of metal from COMEX vaults has resumed and silver inventories have hit record lows with 28 paper claims for each ounce of physical silver.
This analysis focuses on gold and silver within the Comex/CME futures exchange. See the article What is the Comex? for more detail. The charts and tables below specifically analyze the physical stock/inventory data at the Comex to show the physical movement of metal into and out of Comex vaults.
The Federal Government ran a deficit last month of $240B. Revenue continues to be at or below levels last year while expenses continue to grow.
The CPI rose in May by 0.12%. Energy accounted for -0.25% of the move. This means without the move in Energy, the CPI would have risen by 0.37% which annualizes to a rate of 4.5%. This shows that inflation is still quite problematic.
The Treasury has an open data platform where they publish all of the data related to the US Treasury. This includes debt, spending, revenue, etc. Different data sets are updated at different frequencies. The official US Debt is updated monthly (typically by the fourth business day). This data can be seen in the chart below.
The April trade deficit came in at -$74.5B which was the largest trade deficit since October 2022.
Please note: the CoTs report was published 06/02/2023 for the period ending 05/30/2023. “Managed Money” and “Hedge Funds” are used interchangeably.
Managed money has once again bailed on gold, which drove the price back below $2000 an ounce despite the “Other” group stepping in to absorb some of the selling.