Inflation Scorecard: Moderation in All Things

 |  Includes: GDM, NMX
by: Hard Assets Investor

By Brad Zigler

The two historic bellwethers of inflation -- oil and gold -- parted ways this week as gold faltered in its climb above the $1,000 mark. Gold's momentum shift really amounted to a test of support at its breakout levels, while oil's resurgence was driven by an uptick in gasoline demand.

In sum, this week featured moderation in the near-term inflation that's been signaled since Aug. 24.

Among the key inflation indicators Thursday:

  • London morning gold fixings slipped 0.8% lower for the week to an average price of $997.25 per ounce. Meanwhile, spot COMEX settlements rose 0.2% to average $996.70.
  • There was little change in the London gold contango this week. Over the past month, the three-month spread has shrunk by 8 cents an ounce, or 7.3%.
  • While losing ground this week, gold stocks again outperformed the broader equity market. The NYSE Arca Gold Miners Index (GDM) dipped 1.6%, while the Dow Jones Industrial Average fell 2.0%.
  • Nearby NYMEX (NMX) crude oil staged a turnaround and rose 8.8% on the week, to an average barrel price of $70.82. The three-month roll, at $1.26 a barrel, retreated from last week's average of $1.60.
  • The gold/oil ratio fell to 7.9% to a 14.1x multiple.
  • Minor easing in short-term credit was reflected in a one basis point (0.1%) decline in the three-month TED spread -- the yield premium of the London Interbank Offered Rate over U.S. Treasury bills. The week's average spread was 19 basis points.
  • Yields dropped at the long end of the curve as well. The 30-year Treasury bond declined 20 basis points to 3.97%. The spread between three-month bills and the long bond came in 2 basis points to 3.88%.
  • The euro lost ground to the U.S. dollar in interbank trading. The average cross rate slid 1.1% to $1.4643.
  • Our daily updates in the 12-month monetary inflation rate averaged 0.8% for the week, indicating further slowing in near-term velocity.

Long-Term Monetary Inflation

*Note: The monetary inflation rate is calculated daily and represents the change in our proprietary index over the last 12 months. We update long-term inflation in real time as well. Since 1999, the compound annual growth rate in our index is 4.9%.