Gold Surges on Inflation Expectations

By Tom Luongo in Gold and Oil News | November 8, 2012 23:50 | Tags: , , ,

The yield on a 10 year TIP securities dropped to -0.80% yesterday and in doing so sent Gold back over $1700 ounce towards $1720.  Today the 10 year TIPS yield dropped to -0.85% and that sent Gold rocketing through last week’s high of $1731.75 to over $1743 per ounce.  Inflation expectations are rising rapidly and this is pushing Gold back towards a fateful collision with $1800 per ounce and since now that the entire table has been set if it gets there this time it will break through it.  First it needs to close tomorrow above $1732 to negate the last of the potential bearish signals on the charts for the permanently impaired trading futures on the COMEX.

Also of note was that the disconnect between equities and Gold continues to widen as global stock markets were off again today and the S&P 500 closed weakly below its 200 day moving average at 1377.51.  This means that we are finally having ourcome to jesus moment in the markets where Gold is properly no longer trading as arisk-on asset and as the inflation hedge it truly is.  Even a report by the BoE that it was stopping any further QE as it feels the program is not working as intended could not hold Gold back.

That is because the bond traders know that the central banks are trapped and that the BoE talks a good game but in reality when push comes to shove, they will print, baby, print or lose what is left of their political and class structure.

 

About Tom Luongo
Tom is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.


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