Inflation Scorecard: A Respite

By Brad Zigler

Real-time Monetary Inflation (last 12 months): 4.2%

This week, gold and oil cycled lower. Gold essentially ran out of buyers, while the oil market is still working off overhanging supply. These developments, among other factors, backed off inflationary pressures.

Key inflation indicators noted for the week ending Thursday:

• London's morning gold fixings averaged $1.045.25 an ounce, off 0.2 percent from the previous week. COMEX spot settlements were down 1.1 percent at an average $1.046.40 per ounce.

• Gold financing tightened up as the three-month contango loco London fell 2 cents, or 1.2 percent; lease rates ticked up three basis points (0.03 percent).

• Gold stocks led the U.S. equity market lower this week; the NYSE Arca Gold Miners Index (NYSE Arca: GDM) fell 6.9 percent, while the Dow Jones Industrial Average slipped 1.2 percent; year-to-date, gold stocks are up 30.1 percent; the Dow's gained 13.5 percent on the year.

• The crude oil market seemed well-supplied this week, as prices fell 1.6 percent on the spot market to average $79.21 a barrel in NYMEX settlements; a three-month futures roll widened from $1.50 a barrel to $1.62 this week; the quarterly carry cost jumped an average 27 cents a barrel.

• The gold/oil ratio held steady throughout the week, averaging a 13.2x multiple.

• Three-month Treasury yields ticked up four basis points, while a steady LIBOR—the London Interbank Offered Rate—pressured the TED spread lower; the spread reflects a yield premium in dealings between financial institutions.

• Long-dated Treasury prices fell, adding to the yield curve's steepness; the spread between three-month and 30-year paper averaged 4.24 percent, up nine basis points from the previous week

• The Yankee dollar rebounded this week in interbank dealings; the greenback gained 1.1 percent against the euro; the EU currency could be bought at an average cost of $1.4929 over the week.

• The compound annual monetary inflation rate for the decade, measured by HAI's proprietary index, is 5.2 percent; daily readings of the real-time metric indicate a 12-month inflation rate of 4.2 percent; that rate makes the real yield on three-month Treasury bills -3.98 percent.

Long-Term Monetary Inflation

Comments

[woollyB:]

It's not that hard to "back off inflationary pressures" in the midst of deflation.

Oct 31 10:17 AM

[bob dempsey:]

inflation is inevetable

Oct 31 05:02 PM

[BullnBear:]

Interesting, nice data capture.

Oct 31 05:46 PM

[Old Trader:]

We should enjoy it while it lasts. As time goes on, I'm increasingly convinced we're going to see a nasty bout of stagflation. I'm old enough to have gone through the last bout we had, and it is NO fun!!!

I'm thinking we'll be seeing commodity-fueled inflation, while suffering flat economic activity, due to excess capacity in production, labor supply, etc.

Oct 31 06:34 PM

[Dave Wrixon:]

Bernanke's real problem is he cannot shrink the balance sheet because they consists almost entirely of Mortgage Backed Securities and Treasuries. Redeeming one will make the Banks insolvent and redeeming the other will make the Federal Government insolvent. Raising interest rates on the other hand will bankrupt not only the Federal Government but also Main Street.

Yes, inflation is pretty much inevitable, because the big guns of the Fed are full of damp powder.

Nov 01 03:24 AM

[Michael Clark:]

It's a tough spot, no doubt. That's why we need a Volcker instead of a Bernanke. We got ourselves into this mess by ignoring reason and drinking more and more wine (the wonders of debt).

Time to bite the bullet. Bankruptcy is NOT fore ever. Raise rates, face the truth about our way of life, and prepare to recreate America.

It's called self-discipline.


On Nov 01 03:24 AM Dave Wrixon wrote:

> Bernanke's real problem is he cannot shrink the balance sheet because
> they consists almost entirely of Mortgage Backed Securities and Treasuries.
> Redeeming one will make the Banks insolvent and redeeming the other
> will make the Federal Government insolvent. Raising interest rates
> on the other hand will bankrupt not only the Federal Government but
> also Main Street.
>
> Yes, inflation is pretty much inevitable, because the big guns of
> the Fed are full of damp powder.

Nov 01 03:36 AM

[thotdoc:]

From your mouth to God's ear


On Nov 01 03:36 AM Michael Clark wrote:

> It's a tough spot, no doubt. That's why we need a Volcker instead
> of a Bernanke. We got ourselves into this mess by ignoring reason
> and drinking more and more wine (the wonders of debt).
>
> Time to bite the bullet. Bankruptcy is NOT fore ever. Raise rates,
> face the truth about our way of life, and prepare to recreate America.
>
>
> It's called self-discipline.

Nov 01 02:19 PM