more articles by

Jon Nadler

Click to enlarge Click to enlarge


Inflated Inflation Intimations?

By Jon Nadler       Printer Friendly Version Bookmark and Share
Jun 4 2009 4:14PM

"Due to Trade Show travel schedule we will return with the daily commentaries on Monday, June 8th"

Good Afternoon,

Even before the first rebound was seen in the NBA finals, it was time for it to be a rebound day for the precious metals complex. This, following a one-day pullback that was largely dollar and oil-driven. Thursday's recovery was also clearly related to the big comeback in black gold (up $2.74 to 68.86 per barrel) and a fresh dollar pullback (to 79.37 on the index) following a mildly stronger morning start.

Now, then, crude oil surged to a seven-month pinnacle, after Goldman Sachs called for $85 price levels by year-end. Demand reconstruction appears to be the new buzzword in energy, following last summer and fall's meltdown and liquidation. It remains to be seen how much of this so-called recovery on the demand side is tangible, or simply a momentum fund-driven run for the easy buck.

As for the greenback, the best explanation we were able to hunt down for our readers this afternoon, comes from Marketwatch and it says that: "The dollar edged down versus the euro Thursday as the European Central Bank gave a more positive economic outlook and released further details about its bond-purchasing program.

News from Europe, a lack of major changes from policymakers in England and Canada, and an inkling of positive data out of the U.S. added up to more investor confidence with the possibility of a global economic recovery, reducing the desire for the relative safety of the U.S. currency. "Now that the world economy has been taken away from the edge of the abyss, people don't need a safe haven," said Marc Chandler global head of currency strategy at Brown Brothers Harriman." 

Again, we leave it up to the reader to decide if the abyss has been avoided, and whether or not the lessened "need" for safe-haven assists might still include the "need" for "other" safe-haven type of assets. Like, you-know-what. In any event, there is a decidedly higher volume of "turning-point" talk out there, whether it is about the global economy, or oil, or the crisis, etc. As history bears witness, these are precisely the times when indecision, nervousness, uncertainty, volatility, fake-out moves, and a whole host of other emotionally charged days and weeks happen to also take place. Enjoy.

The afternoon hours last had gold trading at $978.60 per ounce, and that was a gain of $16 - or 1.66% - a virtual mirror image replay of Wednesday afternoon's price action. Silver rose 55 cents to $15.86. Platinum recouped the previous day's losses as well, climbing a full $50 to $1285 per ounce. Palladium moved $12 higher, to the $253 level this afternoon. As we went to 'press' the Dow was only marginally higher, gaining 56 points, and the news flows were still celebrating the better than expected jobs data from this morning.

And now, for something completely different: a link to a video clip. Worried about Zimbabwe-on-the-Hudson-231 million percent hyper-inflation? Perhaps you are, perhaps you are not. Worried about 1970's-style hefty inflation - the kind that prompts men like Mr. Volcker to ratchet interest rates up to 19% in a jiffy? Perhaps you are, perhaps you are not. Worried that even 4 or 5 percent inflation is just around the corner? Say no more. We know what you mean. You are worried about inflation. Period.

Never mind that gold's inflation-fighting properties have been put under the microscope and reveal an annualized average return of 2.7% over some 34 years. In other words, not enough to pay for storage and resale costs (see Forbes on the newsstands if you think this is nonsense). Now, gold as a crisis and war-related hedge, that's another story. A very good, solid story.

In any event, Marketwatch brings us the tale of inflation, and whether it is a case of inflated inflationary expectations, or the real McCoy that are at work at the current time.

Until tomorrow, happy watching. Or, worrying, as the case may be.

Jon Nadler
Senior Analyst
Kitco Bullion Dealers Montreal



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.