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Inflation Scorecard: Gold Drubbed By Currencies
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Written by Brad Zigler
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July 09, 2010 10:39 am EDT |
Real-time Monetary Inflation (last 12 months): -2.0%
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Gold spent the week absorbing body blows from all quarters as euro/gold spreads continued to be unwound. Every reserve currency rose against bullion, led by the euro's 5.6 percent gain. The yen appreciated 5.0 percent, while sterling and the Swiss franc climbed 3.9 percent. Overall, the domestic market signaled a desire for more accommodation from the Fed. For the week ending Thursday (GMT), key U.S. indicators included: - London morning gold fixes off 3.1 percent to $1,201; COMEX spot, settling six hours later, lower by 0.9 percent at $1,196; average daily volume in COMEX gold falling 26.5 percent to 179,996 contracts; open interest dipping 6.5 percent to 577,008 contracts; a 35,252-ounce build in COMEX gold warehouse stocks; the 10.925 million ounces on hand are enough to cover 19.0 percent of open interest.
- Three-month London gold lease rates slipping another basis point (.01 percent).
- Disparate performances among gold mining issues as the stocks tracked by the Market Vectors Junior Gold Miners ETF (NYSE Arca: GDXJ) fell by 0.5 percent vs. a 0.4 percent uptick for producers comprising the Market Vectors Gold Miners ETF (NYSE Arca: GDX); the S&P 500 Composite reversing the previous week's loss with a 4.2 percent gain; the blue chip index's correlation to GDX stocks falling 6 percentage points to 50 percent; against bullion, the S&P 500's correlation backtracked with a 7 point rise to -17 percent.
- A 3.4 percent rise in NYMEX WTI crude oil to $75.44 Thursday; the gold/oil multiple ratcheting downward from 16.5x to 15.9x.
- Three-month Treasury bill yields off 2 basis points to 0.15 percent as Libor inched a point lower to 0.53 percent; the resulting 38-point TED spread increased the rate premium for interbank lending by a basis point.
- The one-year finance rate embedded in COMEX gold futures falling to 0.21 percent and a 10 point discount to Treasurys.
- Yields on the long bond up 12 basis points to 4.00 percent, steepening the yield curve to 3.85 percent.
- The euro putting the U.S. dollar on its back foot with a 2.9 percent gain; cross rates averaged $1.2525 for the week, finishing at $1.2603 Thursday.
- Moderation in the recent disinflationary trend as the one-year monetary inflation rate ticked from -3.2 percent to -2.6 percent; at today's rate, the real return on three-month Treasury bills is 218 basis points.
Real-Time Monetary Inflation 
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