Managed Money continues to hammer the price of gold lower as the Net Short position increased to -43k contracts.
Please note: the CoTs report was published on 9/30/2022 for the period ending 9/27/2022. “Managed Money” and “Hedge Funds” are used interchangeably.
The Fed has found it easier to raise rates than shrink its balance sheet. September was supposed to be the month when the Fed got serious about shrinking the balance sheet. After a few months of warming up with $47.5B monthly reductions, the Fed was going to step up in September and shrink by $95B ($60B in Treasuries and $35B in MBS).
That didn’t happen.
I typically start this analysis with gold, but the action in the platinum market is impossible to ignore. The next four charts should tell you everything you need to know.
First, similar to gold and silver, platinum has seen a much higher delivery volume since the pandemic struck in 2020.
Money Supply growth was barely positive in August at $2B and sits well below the $233B seen last year. As the chart below shows, Money Supply growth has collapsed since February. Last year started with five straight months above $200B, whereas 2022 has only seen one month above $100B and that was January.
The Fed has talked a big game lately. Many people (including me) assumed the Fed would fold a long time ago. There is a very good reason — the Fed will crush the economy and the US Treasury with higher interest rates.
In reality, the Fed is holding a losing hand and trying to bluff its way to victory.
The price analysis last month titled Caution Warranted in the Short Term, highlighted the potential risk in gold and silver after a rough July and early August. It concluded the path was much less clear. There were two possible paths forward: Gold could be range bound again between $1750-$1800, or, a hawkish Fed at the Jackson Hole summit could potentially crack $1750 and open up the door for new lows. As it turns out, it was the latter. The gold miners are definitely anticipating this.
September gold has been a very strong delivery month with 8,573 contracts being delivered plus an additional 718 in open interest that will be delivered over the next week (9,219 total). It is currently still below the July month but could exceed the total by the time the month completes due to mid-month activity.
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 $220 billion deficit in August. It was the largest monthly deficit since last July.
The latest seasonally adjusted inflation rate for August came in nearly flat again at 0.09% MoM, dropping to 8.3% YoY. Expectations had been for -0.1% MoM and 8.1% YoY so the market had a very negative reaction to the report.
