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us gdp and inflation

  1. 1,004 Posts.
    Hey all!

    We saw a cut in interest rates that led to a little commods bounce, and then we saw the GDP figures which erased most of those gains (as many of us thought might happen - and it would have been worse if the recession flag was waved more visibly).

    So what we've in effect seen is a drop of fed interest rates, followed by not-so-terrifying GDP figures (in that the slowing was pretty much mid-range on prediciton).

    This is interesting, I reckon. Logic would dictate that lowering interest rates on the back of a semi-stable economy is a recipie for inflation. Q4 will be dismal, of course, but it could be argued that it will be more of a blip than Q3, given it covers the worst of our recent troubles. So while *some* of the inflationary edge will doubtless be eaten by bad Q4 results, I'm starting to think we're seeing a net inflationary scenario right there in those two factors - countless other inputs aside.

    Anyone want to critique that? It's pretty much how I'm reading this mix.

    I reckon, given that, we'll see some more POG fade (in the absence of bad news, it looks like this wants to be low 7s). But I remain medium-term bullish because I think if anything we're seeing the foundations even more firmly laid for an inflationary bubble.

    This is a fairly important 'read' for me, so arguments very much appreciated.
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