The Federal Reserve still seems to be hoping that inflation will just go away on its own or that it can jawbone it down by projecting a few little rate hikes. But the Consumer Price Index data keeps dashing its hopes. In this episode of the Friday Gold Wrap, host Mike Maharrey talks about the January CPI and the Fed’s proposed “fight” against inflation. He also discusses the demand forecast for silver this year.
The latest seasonally adjusted inflation rate for January was 0.65% month over month, with a non-seasonally adjusted annual rate of 7.48%. Both of these numbers came in above expectations.
As hypothesized last month, it was very possible that Omicron temporarily restrained inflation in December and a rebound should be expected. It did not take long for the rebound to occur!
Central banks globally added a net 14.2 tons of gold to their reserves in December, according to the latest data from the World Gold Council. Central bank gold buying was up 82% year-on-year.
Turkey was the biggest buyer in December, adding 10.1 tons of gold to its reserves. That boosted the country’s total gold holdings to 10.1 tons. Turkey was a big seller in the third quarter of last year, but appears to be replenishing its reserves.
In December 2021, the US ran up a total trade deficit of -$80.7 billion, just a tick shy of the record -$80.8 billion set in September. The Goods Deficit increased by 3.2% to come in at -$101.4B, eclipsing the -$100B mark for the first time ever.
This capped off a year in which the trade deficit shattered the record set back in 2006.
Global ETF gold holdings started off 2022 with a healthy increase.
Global gold ETFs recorded net inflows of 46.3 tons last month as gold investment demand returned with decades-high inflation and heightened market volatility. Total ETF gold holdings globally ended January at 3,615.6 tons, according to the latest data from the World Gold Council.
As reported last week, multiple data points in the COMEX are starting to flash yellow in the gold market. Cash settlements are at a recent high, open interest has spiked in March to way above normal, and roll costs are creeping up.
Are these tremors in the gold market?
The Treasury added almost $400 billion of debt in January, the third most since July 2020. As the month closed out, the national debt eclipsed $30 trillion.
The other two larger debt increases both came right after the debt ceiling was raised. Perhaps most important is the fact that almost $200B of the newly added debt was in short-term Bills (turquoise below).
With little fanfare, the national debt crossed the $30 trillion threshold this week. That is an unfathomable number. And as host Mike Maharrey explains in this week’s Friday Gold Wrap podcast, it’s worse than that. Most people aren’t concerned. Maharrey argues that they should be, likening the federal government’s borrow and spend policy to a monetary Jenga game.
As reported last week, Comex January turned out to be extremely strong in both gold and silver for a minor month. Most of that strength materialized after First Position. February was looking modest in gold and weak in silver, but the gold market is now showing outlier trends.
This analysis focuses on gold and silver delivery volume on the Comex. See the article What is the Comex for more detail.
A bill filed in the Oklahoma Senate would establish a state bullion depository similar to the one operating in Texas. This would not only create a safe place to store precious metals; it also has the potential to facilitate the everyday use of gold and silver in financial transactions in Oklahoma and set the stage to undermine the Federal Reserve’s monopoly on money.
