Gold inching higher on minor short-covering, bargain hunting and capital flight problems in India

Gold inched back toward the $1300 level in early U.S. trading today – up $2.00 at $1299. Silver is up 17¢ at $16.68. The timing on the upticks, coincident the last few days with the COMEX open, gives the appearance of some minor short-covering, but it remains to be seen if it indicates a more conclusive turn among the big speculators. Gold could also be attracting some interest from price-conscious bargain hunters. Recent developments in India could also be at play in the gold market. Yesterday, the Royal Bank of India made public its concern about the Fed’s quantitative tightening programming and the stronger dollar. Today it hiked rates to stem capital flows out the country. India’s gold-conscious citizenry is unlikely to take such signals from its central bank lightly – the same mindset that inspires capital flight also inspires gold acquisitions.

Quote of the Day
“I’m in the inflation camp. I think it’s coming. I have thought this for a while. People have looked all over for it as if looking for a lost sock or a hairpin: Where did it go? Where is that thing? But I do believe that the central bankers who have been kind of begging for inflation will be surprised at the generosity of the inflation gods over what they will ultimately be handed.” – James Grant, Grant’s Interest Rate Observer

Chart of the Day

Chart note: This chart illustrates the solid real rate of return gold has delivered against goods and services in twelve of the past sixteen years. In seven of those years, gold’s appreciation significantly outstripped the inflation rate. With gold currently trading at cyclical lows, you can now combine hedging the worst-case scenario with the extra advantage of securing an asset that is generally viewed as undervalued. This chart reinforces gold’s role as an alternative savings vehicle for the times.

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