Daily Market Update

Gold Investments Market Update – Sir John Major and John Williams Say True Inflation at Some 10% in UK and US

Gold

Gold finished trading in New York yesterday at $903.00, down $14.00 but silver was up 5 cents to $17.35. After sharp falls in early trading in the COMEX yesterday (some of which was due to large stop loss sell orders being triggered around the $900 mark) gold rose to close only down some 1.5% on the day. Silver in similar volatile trading surged from interday lows to close higher. The rally continued in electronic trading and in Asian and early European trading.

The rising 200 day moving average at $887 remains strong support for gold and it seems extremely likely that this is another bear raid and another summer correction prior to the period of traditonal seasonal strength for the precious metals – the autumn. Those short this market beware as they are likely to get their heads handed to them on gold plates in the coming autumn months.

Gold is up today as while oil is largely flat so far today yesterday’s sharp rise in oil prices (some 4% in one day) may have given the gold bears pause for thought. The tensions with Iran have not gone away and geopolitical risk remains present which will result in further safe haven buying of gold.

Gold is also being supported by weakness in the dollar which has given up some of its recent gains and renewed weakness in some European equity markets this morning.

Today’s Data and Influences

Markets await the release of the first estimate of Q2 GDP, with the Chicago PMI for July also featuring. Second quarter GDP figures are expected to increase to over 2%, however given the dubious way in which many US government departments calculate statistics, one should not place too much faith in them.

Sir John Major and John Williams Say True Inflation at Some 10% in UK and US

As Ted Rall pointed out in a recent Yahoo News article: “The official inflation rate of two to three percent is a lie, and it has been for years. Presidents Reagan and Clinton ordered the Bureau of Labor Standards to change the way it calculates the Consumer Price Index. Previously they compared the prices of the same items from one year to the next. Now, in order to cheat senior citizens out of cost-of-living increases on their Social Security payments, the government uses a “substitutions” analysis. “The consumer price index assumes that if prices get too high, consumers will start buying cheaper products,” reports The San Diego Union-Tribune. For instance, if steak gets too expensive, they will switch to ground beef.”

Steve Reed, an economist the Bureau of Labor Standards, freely admits the change makes inflation look lower than it is. He also admits its motivation: “Even if the CPI was one percentage point higher, it could cost the government hundreds of millions of dollars.”

John Williams, an economic consultant who publishes the monthly newsletter “Shadow Government Statistics,” calculates that “inflation is actually running at an annualized rate of 9.95 percent.”

And this incredible financial charade is not confined to the US.

Sir John Major, the ex Prime Minister of the UK says that inflation in the UK is also running at multiples of the official government figures and he believes inflation is actually at over 10%. Just two weeks ago Major warned that true annual rate of inflation is as much as 10 per cent and that changes to the way inflation is calculated had been “extremely misleading”, with increasing food prices and heating bills not reflected by the official statistics on the cost of living.

He told BBC1’s Andrew Marr Show: “I would say inflation is probably double the RPI [Retail Prices Index] figure, so we’re between 8 and 10 per cent.”

With governments hedonically adjusting and articially manipulating financial and economic statistics, it is more important than ever that investors focus on financial and economic reality and not some hoped for facade. Investors who continue to heed the soothing sounds from governments and Wall Street will see their wealth further sharply eroded in the coming years.

Gold and Silver

Gold is trading at $912.20/912.70 per ounce (1115 GMT).
Silver is trading at $17.53/17.57 per ounce (1115 GMT).

PGMs

Platinum is trading at $1738/1748 per ounce (1115 GMT).
Palladium is trading at $380/385 per ounce (1115 GMT).

Mark O'Byrne
Executive Director

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