Gold’s weakness carried over from last week as bullion lost further ground to the world’s reserve currencies. Bullion slumped 4.4 percent against the Swiss franc and the euro while giving up 2.8 percent in yen. Gold ceded 1.9 percent to sterling.  

For the week ending Thursday, disinflation in the U.S. dollar moderated:

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• London’s morning gold fix averaged $1,337 to finish 2.0 percent lower; COMEX spot settled 2.1 percent lower at $1,318 after averaging $1,334; average daily COMEX volume rose 29.6 percent to 271,803 contracts; open interest declined by 89,891 contracts to 491,222.
• COMEX gold inventories fell 128,862 ounces (4.0 tonnes) to 11.59 million and now cover 23.6 percent of open interest; demand for COMEX bullion could reach 9.90 million ounces through February; 2.96 million ounces are now in a deliverable position.
• Bullion assets of the SPDR Gold Trust (NYSE:GLD) tumbled 24.9 tonnes (800,136 ounces) to end the week at 1,226.5.
• The average cost of protective gold puts dipped 4.9 percent while mean projected volatility, measured by the CBOE Gold Volatility Index (CBOE:GVZ), increased 0.6 points to 18.9 percent.
• One-year gold lease rates rose by 5 basis points (0.05 percent) to an average of 0.21 percent.
• Gold equity investors again retreated from risk this week; the share price of the Market Vectors Junior Gold Miners ETF (NYSE:GDXJ) declined 1.9 percent; the value of larger-cap producers comprising the Market Vectors Gold Miners ETF (NYSE:GDX) slid 1.7 percent; the S&P 500 Composite, meantime, gained 1.3 percent.
• The correlation of gold producers’ stocks to the S&P 500 increased 3 points to 9 percent; the blue-chip benchmark’s correlation to bullion declined 20 points to -17 percent.
• WTI spot crude oil fell another 3.8 percent, averaging $87.23 a barrel; the gold/oil multiple rose to 15.3x from 15.0x.
• COMEX financing costs fell to a 24-basis-point discount to one-year Treasurys, shifting  market expectations to flat or lower yields; the one-year COMEX contango fell another 5.6 percent to $10.20 an ounce.
• Interbank yield spreads held steady this week as one-year TED spreads hovered at 0.51 percent.
• Long bond yields averaged 4.56 percent, 2 basis points higher that last week’s mean; the uptick made the Treasury yield curve slightly steeper at 441 basis points; six months ago, the curve was only 394 points wide.
• The euro gained 1.7 percent against the U.S. dollar, averaging a $1.3584 cross rate in interbank trading.
• Disinflation, measured by the HAI Monetary Inflation Index, moderated this week; daily readings in the one-year inflation rate averaged 0.0 percent vs. -1.4 percent last week; at today’s rate, the real return on three-month Treasury bills is 1 basis point.

HAI Monetary Inflation Index (Year-over-Year Change)

Written by Brad Zigler From Hard Assets Investor

HardAssetsInvestor.com (HAI) is a research-oriented Web site devoted to sharing ideas about hard assets investing. The site has been developed as an educational resource for both individual and institutional investors interested in learning more about commodity equities, commodity futures and gold (the three major components of the hard assets marketplace). The site will focus on hard assets investing without endorsing or recommending any particular investment product.

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