The April trade deficit came in at -$87B. This was the first time in 5 months that a new record had not been set (pink dot below). The Net Goods Deficit remained below -$100B for the fifth straight month. This Trade Deficit comes on the heels of an absolutely massive -$108B Deficit in March. It’s likely that some of the April deficit was counted in March, so expect a rebound in the May number.
The Treasury increased the total debt by $125B in May after a brief drop in April. This brings the total debt increase so far in 2022 to $880B. More importantly, though, the cost to service the debt is exploding. Total annualized interest has increased by $40B or 13.5% since the start of the year!
Please note: the COTs report was published 6/3/2022 for the period ending 5/31/2022. “Managed Money” and “Hedge Funds” are used interchangeably.
Gold
Since the peak on March 8, Managed Money has massively reduced its Net Long positions by 98k contracts or 66%. Despite massive selling, the gold price has actually held up fairly well. The last time Managed Money net longs dropped this low in February, gold was struggling at the $1800 level, versus the struggle at $1850 now.
The May jobs report was widely regarded as strong. The US economy added 390,000 jobs, according to the latest data. But a deeper dive into that data reveals that the labor market might not be as strong as the mainstream spin is leading you to believe. Even with all the new jobs, hiring slowed in five out of eight sectors.
Why haven’t gold and silver rallied as one would expect in such a high inflation environment? In this episode of the Friday Gold Wrap, host Mike Maharrey delves into some of the psychology driving the markets and explains why it could be blinding people to just how serious the economic situation has become. He also reports some news that indicates some people may be starting to figure it out.
A lot of investors wonder about the lack of movement in gold and silver, especially given rampant inflation. Why haven’t we seen a big rally in precious metals as many expected? Why shouldn’t you just give up on gold and silver?
Peter Schiff answers these questions in this video.
Last week, Tennessee Gov. Bill Lee signed a bill repealing the sales tax on the sale of precious metal bullion. Ending the sales tax will relieve some of the tax burdens on investors, and take a step toward treating gold and silver as money instead of as commodities.
The following provides an in-depth analysis of the COMEX futures options market for gold and silver.
Gold: Recent Delivery Month
Gold started June delivery with 22,394 contracts outstanding. This is below April and December, but above August, October, and February. It is about on par with last June.
Despite rising through the month, the Fed balance ended up shrinking slightly by $25 billion in May, even as it slightly increased its Treasury holdings.
This was the first monthly decline in the balance sheet since $220B of “Other” rolled off in July 2020. In that case, “Other” were repurchase agreements with foreign entities to provide liquidity and alleviate stress in the global markets.
When the Federal Reserve tinkers with interest rates, it creates all kinds of economic distortions. This is very obvious in the housing market. Over the last couple of years, the Fed blew up a giant housing bubble. Now, the central bank has pricked that bubble. In this episode of the Friday Gold Wrap podcast, host Mike Maharrey looks at the housing market as a microcosm of the broader economy.
