HardAssetsInvestor

Written by Brad Zigler  |

May 28, 2010

Inflation Scorecard: Gold Mostly Higher

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Most of the world's reserve currencies lost ground to gold this week. The notable exception was the Japanese yen, which appreciated 0.4 percent versus bullion. The euro fell 1.2 percent, while sterling eased 0.7 percent. Gold set a new high against the Swiss franc when it rose 1.8 percent against the currency.

Here's how the U.S. dollar fared for the week ending Thursday:

• At the morning fix in London, gold rose 2.0 percent to $1,211, averaging $1,196 for the week; COMEX spot settlements also climbed 2.0 percent to $1,212; daily volume for the COMEX gold market jumped by 142,314 contracts, or 53.2 percent, this week; on average, 340,106 contracts changed hands each day; open interest fell by 4,317 contracts, or 0.7 percent, to 575, 174 contracts; the buildup in the COMEX gold inventory continued, as another 195,531 ounces was added to warehouse stocks; the 10.736 million ounces on hand now covers 18.7 percent of COMEX open interest.

• Three-month London gold lease rates nudged up 6 basis points (.06 percent).

• Once again, the shares of gold exploration companies tracked by the Market Vectors Junior Gold Miners ETF (NYSE Arca: GDXJ) outperformed senior producers comprising the Market Vectors Gold Miners ETF (NYSE Arca: GDX); the junior ETF shot up 10.5 percent this week, while the GDX portfolio gained 6.7 percent; blue-chip stocks proxied by the S&P 500 Composite rose 2.9 percent as the index correlation to senior gold stocks ticked up 4 points to 38 percent; the S&P's correlation to bullion slipped to -13 percent this week.

• The nearby NYMEX crude oil contract rebounded 9.6 percent to $74.55 Thursday, averaging a barrel price of $70.99 for the week; the gold/oil multiple dropped to 16.3x.

• Three-month Treasury yields remained flat at 16 basis points, but another 5-point uptick in Libor further widened the TED spread to 38 points.

• Financing rates embedded in COMEX gold futures returned to a 26-basis point premium over one-year Treasurys.

• Government long bond rates jumped 11 basis points to a 4.24 percent yield, steepening the Treasury curve to 408 basis points; 30-year paper yielded 4.21 percent six months ago.

• The U.S. dollar ticked up 3 basis points versus the euro this week; the average cross rate in interbank trading was $1.2385.

• Disinflation continued this week as one-year monetary inflation fell from -1.9 percent to -2.8 percent; at today's rate, the real return on three-month Treasury bills is 360 basis points.

Monetary Inflation Index