HardAssetsInvestor

Written by Brad Zigler  |

December 04, 2009

Inflation Scorecard: Gold Drives Expectations

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Gold scored a royal flush this week, finally notching all-time highs in every reserve currency. The Japanese yen succumbed on Thursday to complete the run, joining the ranks populated by the U.S. dollar, the Swiss franc, the euro and the pound sterling.

Key inflation markers for the week ending Thursday:

• London gold rose 3.6 percent for the week, averaging $1,191.95 an ounce at the morning fix while COMEX spot settlement prices averaged $1,196.80 for a 2.6 percent gain.

• The COMEX contango shrank dramatically, indicating traders' keener interest in the spot delivery; the spread between the active December 2009 and February 2010 contracts contracted by 40 cents an ounce, or 31 percent, over five trading sessions.

• Senior gold stocks trumped junior issues as shares of the Market Vectors Gold Miners ETF (NYSE Arca: GDX) rose 1.3 percent vs. a 0.7 percent gain in the Market Vectors Junior Gold Miners ETF (NYSE Arca: GDXJ); meanwhile, the S&P 500 Composite lost 1 percent.

• NYMEX spot crude oil slumped 1.9 percent to an average price of $76.95 a barrel; oil's contango took an opposite tack to gold's and widened $1.07 a barrel, or 1.4 percent, for a three-month roll.

• The gold/oil ratio rose to a 15.9x multiple.

• Three-month Treasury yields rose by a basis point (0.01 percent) while LIBOR slipped by an equal amount; the resulting TED spread contracted to 24 basis points, indicating an easing in interbank lending rates.

• Long bond rates ticked up 12 basis points to an average 4.25 percent; in the last six months, the 30-year Treasury rate has eased from 4.45 percent.

• The U.S. dollar fell 3.4 percent against the euro; cross rates averaged $1.5046 in interbank trading this week.

• Year-over-year monetary inflation rose another 11 basis points to 5.0 percent, making the real yield on three-month Treasury bills -4.73 percent; the average annual monetary inflation rate over the past decade is now 6.1 percent.

Real-Time Monetary Inflation