Inflation Scorecard: Gold Wraps Up Year With Record Gains (GLD, GDX, GDXJ)

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Inflation Scorecard: Gold Wraps Up Year With Record Gains (GLD, GDX, GDXJ)

December 31st, 2010

Gold won the last weekly round of our 2010 Scorecards with record-setting highs vs. the euro and pound sterling. Bullion notched a 2.2 percent gain against British paper while rising 1.5 percent opposite the European common currency. The Swiss franc gave up a scant 0.3 percent to gold this week, but the standout was the yen which appreciated 0.4 percent against the metal.

For the week ending Thursday, the key dollar-denominated inflation markers included:

London gold gaining 1.6 percent at the morning fix, averaging $1,394 an ounce and ending at $1,412; spot COMEX settlements averaged $1,397 to finish 1.4 percent higher at $1,406; average daily COMEX volume fell by 42.1 percent to 81,367 contracts while open interest rose by 8,725 contracts to 590,858;
COMEX warehouse gold stocks falling 9,950 ounces (0.3 tonnes) to 11.64 million; COMEX stocks cover 19.1 percent of open interest; immediate gold demand is equal to or less than 23,900 ounces while 3.08 million ounces are in a deliverable position;
Bullion assets of the SPDR Gold Trust (NYSE:GLD) dropping 7.9 tonnes (253,798 ounces) to 1,280.7 tonnes;
The cost of protective gold puts rising 1.9 percent as projected volatility, measured by the CBOE Gold Volatility Index (CBOE:GVZ), ratcheted up 3.4 points to 19.7 percent;
One-year gold lease rates gaining 2 basis points (0.02 percent) to 0.09 percent;
Investors taking high-risk money off the table as the share price of the Market Vectors Junior Gold Miners ETF (NYSE:GDXJ) slipped 2.2 percent; conversely, the value of the Market Vectors Gold Miners ETF (NYSE:GDX), made up of larger-cap gold producers, increased by 1.7 percent; the Gold Miners Risk Ratio fell 4.1 points to 64.4;
Gold again regaining its mantle as a risk diversifier; bullion’s correlation to the S&P 500 flipped into negative territory to land at -10 percent; the blue-chip benchmark’s correlation to senior gold stocks fell 19 points to 30 percent;
WTI spot crude oil slipping 0.7 percent to $89.84; the gold/oil ratio eased 15.5x to 15.4x; the multiple’s trend reflects investors’ expectations of a recovery.
Finance rates embedded in the COMEX gold futures market narrowing their discount to Treasurys; rates still remain in an uptrend, signaling expectations for higher interest costs;
The one-year TED spread—a yield premium demanded by financial institutions for interbank lending—easing a basis point to 0.18 percent as Treasury yields inched lower;
Long bond rates sliding 5 basis points lower to 4.43 percent and flattening the yield curve to 431 points; six months earlier, the yield curve, at 374 points, was even more compressed;
The U.S. dollar holding steady against the euro, averaging a $1.3144 cross rate in interbank trading;
A whittling in the disinflation rate; daily takes on the one-year monetary inflation rate averaged -1.4 percent vs. -1.6 percent last week; at today’s rate, the real return on three-month Treasury bills is 86 basis points.

Monetary Inflation

Written by Brad Zigler From Hard Assets Investor

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