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