Inflation Scorecard: Gold Bides Its Time

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 |  Includes: CGLD-OLD, GDX, GDXJ, IAU
by: Hard Assets Investor

By Brad Zigler

Real-time Monetary Inflation (last 12 months): -2.7%

Gold showed some late-week strength after backpedaling against the world's reserve currencies. For the week ending Thursday, bullion lost 2.5% versus the euro, 1.9% against sterling and 1.6% in Swiss francs. Gold managed to gain ground against the U.S. dollar and the Japanese yen this week.

U.S dollar benchmarks as of Thursday included:

  • Morning gold fixes in London averaged $1,229 and was last at $1,234; COMEX spot settlements, after averaging $1,232, finished at $1,247; COMEX gold volume fell 36,558 contracts, or 26.6%, week-over-week and averaged 114,270 contracts daily; gold open interest slipped 1.4%, or 8,027 contracts, to 569,744; gold stocks inventoried by COMEX increased by 73,520 ounces to 10.795 million, enough to cover 18.9% of open interest.
  • Three-month London gold lease rates rose by 5 basis points (.05%).
  • Once again, exploration and development company shares outperformed established producers. Stocks tracked by the Market Vectors Junior Gold Miners ETF (NYSEARCA:GDXJ) climbed 5.6% this week, while the Market Vectors Gold Miners ETF's (NYSEARCA:GDX) stocks rose 4.5%; meantime, the S&P 500 Composite gained 2.7% this week; the correlation between the broad market index and the GDX benchmark rose 4 percentage points to 41%; against bullion, the S&P 500's correlation rose by 8 points to -15%.
  • NYMEX WTI crude oil prices rose 1.7% to $76.79 Thursday and averaged a barrel price of $76.06 for the week; the gold/oil multiple continues to hold at 16.2x.
  • Three-month T-bill yields ticked up a basis point to 0.09%; Libor remained unchanged at 0.54%, putting the TED spread—the interest rate premium demanded for interbank lending—at 0.45%.
  • One-year financing rates implied in the COMEX gold futures term structure fell another 6 basis points; presently, gold financings earn a 14 basis point premium over one-year Treasurys.
  • Thirty-year Treasury bond yields fell 12 basis points to 4.13% and flattened the yield curve to 404 basis points; six months ago, the long bond yielded 4.42%.
  • The greenback eased 2.6% against the euro for the week; the average cross rate in interbank trading was $1.2200.
  • One-year monetary disinflation eased to -3.6% from -4.7%; at today's rate, the real return on three-month Treasury bills is 290 basis points.

Real (Inflation-Adjusted) Treasury Bill Yield

Real (Inflation-Adjusted) Treasury Bill Yield