Inflation Scorecard: Strong Oil, Weak Dollar

By Brad Zigler

Real-time Monetary Inflation (last 12 months): 3.6%*

Oil continued to lead the commodity complex higher this week, coat-tailing, to some degree, on a weakening U.S. dollar.

Producer Price Index data released Tuesday suggested a bottom in the disinflationary trend was made in May.

Among Thursday's key inflation indicators:

• London gold was fixed at $1,054.75 an ounce in the morning, up 0.2% from week-ago levels; fixings averaged $1,055 for the week, slightly lower than last week's mean; COMEX spot gold last settled at $1,057.80, up 0.8% on the week; settlements averaged $1,057.50 on COMEX;

• London's three-month gold contango held steady this week, while the one-month spread contracted 5 cents.

• The NYSE Arca Gold Miners Index (GDM) dropped another 2.3% on the week, while the Dow Jones Industrial Average inched up 0.2%.

• Crude oil prices climbed past $81 a barrel, a 4.6% ascent since last Thursday; the nearby NYMEX contract average settlement was $79.96, more than $5 above last week; the NYMEX three-month roll narrowed from $1.62 a barrel to $1.50 this week.

• The gold/oil multiple continued to shrink to 13.2x with oil's advance.

• Three-month Treasury yields held steady at 6 basis points (0.06%); a steady LIBOR - the London Interbank Offered Rate - kept the TED spread even at 22 basis points; the spread reflects the yield premium demanded on loans between financial institutions.

• Yields on the 30-year Treasury bond eased seven basis points this week to average 4.21%; the Treasury curve flattened six basis points as a result.

• The U.S. dollar weakened further against the euro; greenbacks could be traded Thursday at an average price of $1.4957, reflecting a 0.5% decline in the dollar's value this week.

• HAI's 12-month monetary inflation rate averaged 3.3% over the week; Thursday's rate of 3.6% was 40 basis points higher than last Thursday's; the rate makes the real yield on three-month Treasury bills -3.58%.

Real (Inflation-Adjusted) Three-Month Treasury Yields

*Note: The monetary inflation rate is calculated daily and represents the change in our proprietary index from this date one year ago. We update long-term inflation in real time as well. Since 1999, the compound annual growth rate in our index is 5.4%.