Inflation Scorecard: Prices Bottoming

Real-time Monetary Inflation (last 12 months): 4.6%

Data published by the U.S. Bureau of Labor Statistics this week shows U.S. inflation continuing to bottom. Year-over-year, the Consumer Price Index slipped 0.2 percent in October, its shallowest decline since March. Wholesale prices for finished goods, metered by the Producer Price Index, fell 1.9 percent annually, also the smallest decline since March.

Key inflation markers notched in the week ending Thursday include:

• Gold fixes in London averaging $1,130 an ounce; Thursday morning's fix at $1,136 put gold prices up 1.8 percent for the week; COMEX spot settlements averaged $1,135.10, up 3.2 percent.

• Gold financing costs in London increased as lease rates fell; the financing curve flattened when one-month forward rates rose faster than three-month rates.

• Gold stocks had a strong week, especially junior issues; the smaller stocks making up the Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) gained 8.4 percent for the week versus the 5.5 percent rise chalked up by the senior issues in the Market Vectors Gold Miners ETF (NYSE: GDX); the contemporaneous pickup in the S&P 500 Composite was 0.7%.

• Crude oil prices rose modestly as the nearby NYMEX contract for West Texas Intermediate crude settled at $77.46 on Thursday, up 52 cents for the week; the cost of three-month roll continued to increase, this week rising 9 cents to $2.07 a barrel.

• The gold/oil ratio also inched higher, to a 14.7x multiple.

• On Thursday, the yield on three-month Treasuries weakened, while the London Interbank Offered Rate softened only slightly; the TED spread-the yield premium demanded in interbank lending-widened to 26 basis points (0.26 percent), its highest reading since Aug. 20.

• Treasury long bond yields fell to 4.29 percent, just 8 basis points higher than rates six months ago; the Treasury curve flattened 8 basis points this week, to 4.28 percent.

• The U.S. dollar continued to strengthen this week against the euro; cross rates averaged $1.4921 in interbank trading, reflecting the greenback's 0.6 percent appreciation.

• On a year-over-year basis, monetary inflation spiked 32 basis points higher, to 4.6 percent, making the real yield on three-month Treasury bills -4.41 percent.

Real (After-Inflation) Yields On Three-Month T-Bills

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