GDP fell 0.9% in the second quarter. This followed on the heels of a -1.6 GDP print in Q1. Back-to-back contractions in GDP have historically been defined as a recession, but the Biden administration and their apologists insist we aren’t in a recession. Peter Schiff appeared on the Megyn Kelly show to talk about the White House recession spin. He said this recession is just getting started.
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?
Gold demand through the first half of 2022 came in at 2,189 tons, up 12% over the first half of last year, according to the World Gold Council Gold Demand Trends Q2 report.
Congress passed a bill to prop up the US semiconductor industry last week and is now considering a new spending plan dubbed the “Inflation Reduction Act.” On his podcast, Peter Schiff talked about the Democrats’ legislative agenda and concluded that the “Inflation Reduction Act” will do the exact opposite.
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.
This week, the Federal Reserve raised interest rates another 75 basis points despite a second straight quarter of negative GDP growth. Meanwhile, Congress is debating a big government spending bill to “reduce inflation.” In this week’s Friday Gold Wrap podcast, host Mike Maharrey tries to unspin all of the spin and government propaganda to make some sense of what’s going on.
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.
Rapidly rising prices put the squeeze on everybody’s wallets. A recent study showed that inflation is hitting rural Americans particularly hard. According to the Iowa State University report, people in rural areas now spend 91% of their income on expenses alone. Peter Schiff recently appeared on Rob Schmitt Tonight to talk about the pain of the inflation tax.
The Federal Reserve delivered another 75 basis point interest rate hike at its July FOMC meeting. This pushes the federal funds rate over the 2% threshold to between 2.25% and 2.5%.
The mainstream media emphasized the size of the hike. One headline called it “a second super-sized hike,” with many other mainstream pundits noting that it matched a June hike was the biggest since 1994. But it wasn’t as big as the full 1% hike everybody thought was on the table after we got June’s flaming hot Consumer Price Index (CPI) data.
Here’s the question: has the Fed reached the end of its rope? Will this be the last hike in this cycle?
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.
