Charts of the Day: NY Spot Gold, Commodities Respond to Fed Money Printing

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Includes: DBC, GLD
by: Edward Harrison

The Federal Reserve is attempting to reflate the US economy to close the output gap and create jobs. They have decided to purchase medium-term Treasury paper to do so. But monetary policy is a blunt instrument. QE is already having all sorts of unintended consequences, the first of which was a big sell-off on the long end of the Treasury curve. The second was an almost instantaneous negative reaction by emerging market policy makers. The third I have noted is the rise in the price of gold as US dollar currency revulsion takes hold.

The chart below shows gold up to 1378 already today. That’s actually $40 or 3 percent from yesterday.

ny-spot-gold

Source: Kitco

And gold is not the only commodity vaulting higher. All energy and agricultural commodities are up as well. Inflation here will pass through to consumers as a regressive tax via food and energy prices.

commodities-2010-11-04

Source: Bloomberg

But everything is up. The Fed is getting what it wants too: asset price inflation. Stock futures are up.

stocks-2010-11-04

Source: CNN

The asset-based economy is alive and well.