Inflation Scorecard: No Course Change This Week

Real-time Monetary Inflation (last 12-months): 2.2%

Declining commodity prices kept the pressure off the Fed this week to snug up on rates.

Key inflation markers for the week ending Thursday:

• London gold was off 2.7 percent, averaging $1,124 at the morning fix; spot COMEX averaged $1,119, finishing with a 2.2 percent loss; mean COMEX volume was 186,300 contracts per day; open interest rose 1.6 percent to an average 502,600 contracts.
• Three-month London gold lease rates dropped a basis point (0.1 percent) as forward rates advanced modestly.
• COMEX gold stocks were built up by 26,600 ounces to top 10 million ounces; warehouse supplies now cover 19.8 percent of futures open interest.
• The gold stock sector was mixed. The Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) gained 1.6 percent, but major producers comprising the Market Vectors Gold Miners ETF (NYSE: GDX) suffered a 0.6 percent loss; with the S&P 500 Composite rising 2.4 percent, the correlation of GDX to the blue chip benchmark rose to 66 percent.
• NYMEX crude oil clambered 2.4 percent higher to an average price of $81.81, dropping the gold/oil multiple to 13.5x.
• Rates on three-month Treasury bills ticked up, depressing the TED spread-the yield premium on interbank loans-to an average 11 basis points.
• COMEX-implied one-year interest rates slumped to a 10-basis-point premium over Treasurys, signaling a moderation in interest rate expectations.
• The yield on the long bond ratcheted up 10 basis points, steepening the Treasury curve to 452 points.
• The greenback continued to strengthen against the euro, rising by a third of a percent; average cross rates in interbank dealings were $1.3625.
• Year-over-year monetary inflation averaged 2.4 percent, up from last week's 2.2 percent rate; the real return on three-month Treasury bills ended at negative 204 basis points; long-term monetary inflation is now running at an average annual rate of 3.8 percent.

Monetary Inflation Index