Inflation Scorecard: Moderation in All Things

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%.

Comments

[BullnBear:]

I’m curious if strong dollar sentiment may be returning to the fed and if so what this will do to energy and precious metals going forward other than the obvious weakening effect that this may have.

Gold usually gets hit harder than Oil on the strong dollar because of world conflicts of course and we may be seeing the ramp up of some of that now in the Middle East with Iran.

Oct 03 12:19 AM

[jerrydd:]

Yeah right!! Inflation is going to rise? That is a joke. Just because wall street, the market always is going up, say it will just won't make it happen.

The only thing that will rise is oil and not even that in the short term.

We still have massive foreclosures in both housing and commercial to come from unemployment which is really 17% and then next yr oil will rise sucking whatever money is left, only wall street would think inflation will rise. So just where is all this buying power going to come from?

Oct 03 11:03 AM

[Donald Ingram:]

There is no way that the Fed can restart the system by fostering inflation. Although they are trying very hard! About all they are accomplishing is the destruction of the dollar through devaluation.
There is no way that they can replace the amount of money that is being destroyed by the populace deleveraging and not borrowing. This amount of credit destruction far out weighs what the Fed is trying to do. Deflation is alive in the economy and doing well, thank you.

Oct 03 02:48 PM

[Larry House:]

We do not now have nor can we yet see the right combination of forces for substantial inflation. We have 30% slack in production capacity, and almost 10% unemployment (weak consumer demand). We do, however, have the makings of a real inflation problem at some point down the road when the above conditions reverse along with too much liquidity by the Fed. The risk is real, and the probability is overwhelming, but it just isn't here or in sight yet. That said, I am overweight hard assets and will remain so. "Real objects" are better than paper assets in these uncertain times.

Oct 04 12:30 PM

[Fighting Yoda:]

Gold price is no indication or measure of current or future inflation. It is CPI or M2 - both are falling. Also TIPS are pricing in very low inflation.

Oct 05 12:41 AM

[Gold Bug:]

Inflation Inevitable Could Be Much Worse Than the 1970s says Jim Rogers:
Source :
www.JimRogers.Tk

Oct 13 10:03 AM