Both silver and gold had their weakest COMEX delivery months in several years.
Gold started July delivery with 937 contracts outstanding. This is the lowest level since November of last year and the second-lowest since the start of Covid (see figure 2).
The first month of Federal Reserve balance sheet reduction turned out to be a big dud. As it turns out, the balance sheet shrank by less than $1 billion in June during the first month of quantitative tightening.
As part of its vaunted inflation fight, the Fed announced in May that Quantitative Tightening (QT) was set to begin last month. From Reuters:
Federal Reserve Chairman Jerome Powell continues to insist that the economy is strong enough to withstand tighter monetary policy to fight inflation. But the economy seems to be saying otherwise. So, how will this play out? In this week’s Friday Gold Wrap podcast, host Mike Maharrey gazes into his crystal ball and speculates about what might happen over the next several months. He also tells the tale of two central bankers and discusses the current gold market.
According to the seasonally adjusted data, M2 increased by $23B in May. Except for the contraction last month (the first contraction in 12 years), it was the smallest monthly increase in M2 since the start of COVID.
Well-known investment advisor Rick Rule said the Fed will chicken out on its inflation fight.
Rule runs Rule Investment Media and formerly served as the president and CEO of Sprott US Holdings Inc. In a recent interview, Rule said that the Fed could get inflation under control with significantly tighter monetary policy for a sustained period of time. But he said he doesn’t think the central bank has the wherewithal to follow through when the economy starts to crash.
After a big miss on the Powell/Brainard nominations in November, the price analysis has been fairly accurate. Identifying the initial breakout above $1800, mentioning that $1900 was fragile support, and last month concluding that gold had found a bottom around $1800.
For the past month, gold has been consolidating within a tight range around $1850. The data suggests the next move is most likely up. Lots of indicators have bottomed, which leaves little downside remaining. The market has also priced in an extremely aggressive Fed and held up very well over that time.
This analysis focuses on gold and silver physical delivery on the Comex. See the article What is the Comex for more detail.
The Comex has signaled weakness in the silver market but has been some activity bubbling under the surface. What’s really going on with silver?
They tried to deny it for months, but now everybody knows we have an inflation problem. The president, Congress and all of the central bankers at the Fed are trying to find ways to solve this problem. But as host Mike Maharrey explains in this episode of the Friday Gold Wrap, all of their solutions are the equivalent of dumping buckets of water on a drowning man.
Outflows of gold from Comex vaults have accelerated. Meanwhile, there is some shuffling of inventories of silver.
This analysis focuses on gold and silver within the Comex/CME futures exchange. See the article What is the Comex? for more detail. The charts and tables below specifically analyze the physical stock/inventory data at the Comex to show the physical movement of metal into and out of Comex vaults.
The Federal Reserve just gave us the biggest interest rate hike since 1994. A month ago, we were told a 75 basis-point hike wasn’t on the table. It almost seems like the central bankers are winging it. Or as Friday Gold Wrap podcast host Mike Maharrey puts it, it’s like they’re playing darts while wearing blindfolds. In this episode, Mike breaks down the rhetoric coming out of this Fed meeting and speculates on what might be next.
