HardAssetsInvestor

Written by Brad Zigler  |

August 06, 2010

Inflation Scorecard: Gold Reverses Course

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Gold took revenge on the reserve currencies for two weeks of body blows, fighting back to score across-the-board gains. Outside of the U.S. dollar, bullion tagged the Swiss franc hardest, rising 1.6 percent. The euro lost 1.3 percent vs. gold, 0.7 percent against sterling and 0.6 percent in yen.

For the week ending Thursday, key U.S. dollar indicators included:

• Morning gold fixes in London jumping 2.5 percent to $1,195 after averaging $1,184; COMEX spot settlements also ended 2.5 percent higher at $1,197 and averaged $1,188; COMEX gold's average daily volume slumped 58.3 percent to 125,986 contracts on short covering, while open interest fell by another 18,396 contracts to 519,776; COMEX warehouse stocks jumped by 2.8 tonnes (90,167 ounces) to 11.174 million ounces; the COMEX stash now covers 21.5 percent of open interest.

• Three-month London gold lease rates ticking up 1 basis point (0.01 percent); reflecting rising COMEX inventories, rates fell from an early-week spike.

• SPDR Gold Shares Trust (NYSE Arca: GLD) bullion assets wobbled a half-tonne higher to 1,282.7 tonnes.

• Major gold producers proxied by the Market Vectors Gold Miners ETF (NYSE Arca: GDX) gaining 4.2 percent, but trumped by a 7.6 percent rise in the Market Vectors Junior Gold Miners ETF (NYSE Arca: GDXJ); the broader market S&P 500 Composite appreciated 2.2 percent, keeping its correlation to GDX at 49 percent; the blue chip benchmark's correlation to bullion climbed 8 points to 25 percent.

• A 4.7 percent increase in NYMEX WTI crude oil prices; finishing at $82.01 per barrel, prices averaged $81.46; the gold/oil multiple fell to 14.6x from 14.9x.

• Three-month Treasury bill yields ticking down to 14 basis points; a 5 basis point slippage in Libor boosted the TED spread—a measure of counterparty risk—6 basis points.

• COMEX gold futures financing rates inching down a basis point to a 32 point discount to one-year Treasurys.

• A 3 basis point drop in long bond yields compressing the yield curve to 391 points.

• The euro gaining another 1.0 percent against the U.S. dollar to end at $1.3132; cross rates averaged $1.3118.

• Monetary disinflation easing to -1.2 percent from the previous week's -1.7 percent average; at today's rate, the real return on three-month Treasury bills is 149 basis points.

Monetary Inflation Index