Gold prices rise with inflation expectations

Gold prices will keep going up if the pointers to increasing inflation come true.

Michaela Rehle / Reuters
A man holds a 100 gram gold bar from Germany's first gold-plated ATM, in a bank in Munich on Sept. 30. The machine, which features cutting-edge technology, dispenses 1g, 5g, 10g, 100g and 250g gold bars and also dispenses gold coins bearing designs such as Krugerrand, Maple Leaf and Kangaroo, which are sold in gift boxes at real-time prices. If inflationary fears prove true, Americans might start demanding gold-issuing ATMs, too.

Today, the yield spread between regular and inflation-protected U.S. treasuries rose above 200 basis points for the first time since the before the Lehman Brothers collapse in 2008. The regular yield is as of this writing (as usual, when you read this, these numbers have probably changed with a few basis points up or down) 2.46% while the inflation-protected yield is 0.43%, implying an expected inflation of more than 2% per year during the coming decade.

By contrast, on September 1, the regular yield was 2.58% while the inflation-protected yield was 1.02%, implying an expected inflation of just 1.56% per year.
Not coincidentally, gold rose to a new all time high in U.S. dollar terms today.

If, as many suggests, the Fed is actively trying to increase inflationary expectations, then it certainly looks as if they are succeeding.


The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.

of 5 stories this month > Get unlimited stories
You've read 5 of 5 free stories

Only $1 for your first month.

Get unlimited Monitor journalism.