Kitco’s David Lin asked me about my latest research into price action in the gold market, but what he really wanted to know is why gold prices seem to have very low correlation with CPI inflation. My view is that the gold-dollar exchange rate has moved the most based on inflation expectations—but if you look at the USD’s loss of value over time, it’s not true that gold does not provide a measure of inflation. From there, of course we had to get into the great “transitory” question. My view is that the US government’s next batch of inflation numbers may include decreases in year-over-year stats, but should include notable increases over last month—and that could set off fireworks on Wall Street. On top of that, there’s potential for the new Basel III NSFR regulations to disrupt gold futures trading in New York and London.
But the most important takeaway is that whether or not any of these things send gold and silver prices higher, sharp speculators can make money with prices just where they are.