By now it should be common knowledge that the Fed has blown up its balance sheet rather quickly to combat the current banking crisis. As the chart below illustrates, the Fed added a gargantuan sum to its balance sheet in March, netting an increase of $324B.
The seasonally adjusted Money Supply in February fell $121B and the Money Supply in January was revised from positive $31B to -$142B. This is a major revision and now means the Money Supply has fallen for seven straight months.
Gold is wrapping up March, which is a minor delivery month. While it was a decent delivery month, it was the smallest minor month since November 2021.
Gold had a big rally last week. But is it sustainable? What are the technicals saying?
The data over the last several months continues to give insight into the market. November showed the market was in neutral, but then the December analysis correctly identified an impending move upwards, the January review called for a correction and then February concluded:
Given the potential impacts of the ongoing banking crisis, I will start this article with the conclusion.
The current banking crisis could not have come at a worse time for the Comex system. Inventories have seen massive depletion over the last 2+ years as investors have slowly been pulling physical out of the vaults. I have previously called this a run on the vault but labeled it as a stealthy one. As though certain investors did not want to raise the alarm, but slowly take possession while inventory was still available.
The CPI came in at 0.37% for the month of February. While this was in line with expectations, it is still a 4.5% annualized increase in prices.
And falling energy prices made the CPI look cooler than it actually was.
Over the past several months, Mike Maharrey and I have posted numerous articles that conclude the same way… the Fed is bluffing and when something breaks, they will fold. On every podcast, Mike has walked through exactly why this is inevitable. Back in September, I laid out the math that showed why the Fed would fold and laid out a series of risks that may cause such an event. One of those risks was “What if the financial markets freeze because there is a credit event somewhere?”.
The Federal Government ran a deficit of -$262B in February. Ignoring the Student Loan forgiveness allocation in September last year, this is the largest monthly budget deficit since July 2021. And it’s the second-largest February deficit ever.
As discussed last month, it is getting harder to take all the BLS employment data as fact. This month, some of the data is a bit closer in line, but the QECW report seemed to show a big deviation (more below).
The January Trade Deficit saw a slight increase compared to December, coming in at -$68.3B vs -$67.2B in the prior month. After peaking at -$106B in March of last year, the Trade Deficit has returned to a more stable range between -$60B and -$80B.
