Gold drifts sideways as signs of inflation’s return begin to materialize

Gold continues to drift sideways as it awaits, along with the rest of the financial markets, the end of the Fed’s policy meeting and its announcement release early this afternoon. Fed chairman Jerome Powell will hold a press conference shortly thereafter. Trading at $1297 in the early going and up $1.50 on the day, gold is being helped this morning by producer prices which surged .5% in May (a 6% rate annualized). Following on the consumer price report yesterday, which showed retail prices up by nearly 3%, inflation expectations are likely to move to the forefront among financial market participants. Though not likely to alter the Fed’s predetermined course of action, these are the first solid signs that the much-anticipated return of inflation might actually be materializing.

Quote of the Day
“If you ever needed more proof that central banks have crushed these markets, there you have it. The belief that nothing matters other than an inconsequential rate hike some time over a year from now in euro land or whether the Fed will make the ever so bold move of raising the IOER by only 20 basis points speaks volumes. And it isn’t being complimentary. It’s a truly bizarre construct to judge the import and implications of every event through the lens of whether green-pack Eurodollar futures jump or dump half a point. Especially when it’s intermingled for show with nonsense about demographic trends sure to produce a precise outcome 30 years from now. No wonder the smart money is investing in artificial intelligence programs that don’t listen to this tripe.” – Richard Breslow, Bloomberg “Trader Notes”

Chart of the Day

Chart note: We beg your forgiveness if you have seen this chart before, but we think it worth re-posting on a regular basis to demonstrate gold’s strong performance as a portfolio holding over a long period of time – especially for newcomers. It shows the average annual price of gold since 1970. It is meant to dispel the notion that gold is somehow volatile or unpredictable and as a result unreliable as a long-term portfolio safe haven. To the contrary, it shows gold living up to its reputation as precisely the opposite – stable in the face of rapidly changing economic circumstances, predictable in that it reacts directly to those circumstances and reliable in that has performed as advertised over an extended period of time – the extent of the fiat money era that began in 1971.

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