Gold and silver deliveries on the Comex have surged since March 2020. While delivery volume in 2021 and 2022 are below the massive amount seen in 2020, overall volume is very elevated compared to pre-Covid levels.
The Federal Government ran a $211B deficit in July. Except for February, this was the largest deficit since last July when the Treasury ran a deficit of $302B, and it was the second-largest July deficit ever.
The latest seasonally adjusted inflation rate for July came in nearly flat at -0.03%. This was on the heels of a blisteringly hot June number of 1.35%.
While inflation did surprise to the downside, it had been expected to be much lower due to the fall in oil and drop in gasoline prices. The YoY number also fell as the reading from last July of 0.46% fell off the calendar.
The Treasury increased the total debt by $27B in June. Activity slowed in the latest month across all instruments, but particularly the conversion of short-term to long-term. After massive moves to extend debt maturity and shrink short-term debt by $530B over 4 months (shown below by the large negative turquoise bars), July went very quiet.
According to the BLS, the economy added 528k jobs in July, blasting past analyst estimates of 250k. The strong report comes on the heels of a Fed meeting last week that made a point to state they are hyper-focused on the job market as a sign of a weakening economy. The White House and Fed are now in lock step ignoring negative GDP growth and hanging their hat on the job market. For now, that message fits their narrative.
The June trade deficit fell for a fourth straight month to -$79.6B.
While the deficit continues to drop from all-time highs, it is still larger than any month before 2022. June eclipsed December 2021 by $750M. December was a new record then, so the current deficit should be put into the context of longer history despite coming off recent highs.
Please note: the COT report was published 7/29/2022 for the period ending 7/26/2022. “Managed Money” and “Hedge Funds” are used interchangeably.
As discussed last month, overall net positioning is the smallest it has been since May 2019. Then, on July 12, Managed Money went short gold for the first time since April 2019.
Are those shorts about to get squeezed?
Delivery volume in the July gold contract got off to the weakest start in years, but then had a major mid-month rally, turning it into one of the strongest minor months in recent history. Over the last 15 months, it only trailed the blow-out month of March. Momentum has continued in the August contract.
Another month in and the Fed is still struggling to implement Quantitative Tightening (QT). According to the plan the Fed outlined last May, the central bank should be shrinking the balance sheet by at least $47.5B a month, spread between $30B in Treasuries and $17.5B in MBS.
That’s not happening.
Money Supply growth is falling rapidly. Two of the last three months have seen a decrease in the seasonally adjusted M2 Money Supply with the recent month dropping $17B. Given that April was the first contraction in 12 years, two of the last three months being negative is an ominous sign.
