In mid-August, I noted that traders seemed to be confused about the implications of the evidence of inflation on Gold prices
[Related Article: http://financial-matrix.blogspot.com/2006/08/inflation-confusion-1.html#links ]
It appears that this confusion is continuing. Yesterday, Gold sold down up to $10 on a PPI report that, in my opinion, was fairly inflationary, with core PPI coming in at +0.6%, despite the largest drop in PPI in 20 years.
Today, the CPI numbers came in a bit tamer than expected, with CPI coming in at -0.5% and core CPI at +0.2%, versus expected readings of -0.3% and +0.2%, respectively. Not surprisingly, Gold has been fairly steady so far following this news.
It is unclear what the reason is for the current views of the market that evidence of inflation is gold-negative. Obviouosly, this is evidence that people are fairly confident in the Fed's ability to manage inflation and are thus currently seeing higher inflation as being linked to more interest rate rises and dollar strength. Inflation being currency positive? That seems to be the implication under the current view...
I have some doubt whether the real Gold bull market can reemerge while such a popular view continues.
No comments:
Post a Comment