Consumer Price Inflation has finally arrived and Gold will have its day in the sun yet.
Whilst the credit crunch seems to have abated, it wasn’t long ago that financial institutions were getting bailed out every other day.
Let’s see, we had Countrywide Financial, German IKB and UK based Northern Rock.
And the rumours. Oh the rumours. Let’s see, there was rumours of liquidity problems at Barclays Bank, Alliance & Leicester and Australian Adelaide Bank and on and on…
Central Bankers the world over predictably come to the aid of ailing financial institutions by providing loan guarantees, emergency funding and rate cuts in an attempt to keep credit markets operational.
The message ofcourse has not been lost on Gold.
When central bankers open their check books for all to come and borrow, to borrow with abandon, the message the market receives is clear. Nobody will be left to fail, central banks will print as much money as it takes to ensure this. Predictably, Gold will continue to rise as the bailouts stack up.
Loose monetary policy is going to unleash devastating price inflation and will further underpin this bull market in Gold.
Chart 1 - 10-yr Note Yield bouncing off 50 month moving average
Bonds are challenging their 50 month moving average and long-term uptrend. Probabilities favour higher yields going forward.
Talking about inflation, what better way to gauge Consumer Price inflation than by looking at food prices? Just take a look at this chart of Corn going back to 1972!
Chart 2 - 35 year Corn - 400c is tough resistance
400 – 420c has been incredibly strong resistance going back as far as 1973!
With the continued strength in Current Oil Prices it seems likely that Corn will finally breakout of this consolidation and unleash a fire storm of price inflation.
This will push long-term rates sharply higher along with Gold as the safe haven investment of choice!
More commentary and stock picks follow for subscribers…
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Greg Silberman CA(SA), CFA greg@goldandoilstocks.com I am an investor and newsletter writer specializing in Junior Mining and Energy Stocks. Please visit my website for a free trial to my newsletter. Click here: http://blog.goldandoilstocks.com
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Information, charts or examples contained in this lesson are for illustration and educational purposes only. It should not be considered as advice or a recommendation to buy or sell any security or financial instrument. We do not and cannot offer investment advice. For further information please read our .
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