Thursday, May 25, 2006


A 'Stagflation Scenario' For The US?

Precious metals are up in morning trading. "Gold futures edged higher Thursday morning on the heels of the previous session's $36 retreat as a smaller-than-expected revision to U.S. gross domestic product estimates weighed on the dollar, prompting investors to take refuge in the precious metal. The dollar fell against the yen and euro after a revision of U.S. gross domestic product estimates came in short of expectations."

"'When taken together, the GDP numbers and [Wednesday's] plunge in durable-goods orders contributed to the dollar's decline,' said Jon Nadler, at 'A reasonably good case appears to be shaping up in favor of a pause in interest-rate rises as we head into June,' he said."

"Against this backdrop, gold for June delivery tacked on $6.50 to trade at $644 an ounce on the New York Mercantile Exchange. Meanwhile, adding pressure to the dollar Thursday were upbeat Japanese economic data and figures from several countries, such as Qatar and Sweden, indicating less of a willingness to hold dollars in their reserves and perhaps more gold, such as Russia and China, said Nadler."

"'The U.S. economy could indeed be heading towards a stagflation scenario, as housing shows a cooling trend (consumer spending thus cannot be far behind) and inflation shows a stubborn tendency to keep showing up as the uninvited guest,' he said."

"Meanwhile, July silver lost 2.5 cents to trade at $12.49. July platinum added $4.9 to $1,290 an ounce after Wednesday's 2.8% loss. June palladium shed $7.55 at $347.20 an ounce."

The way I remember the stagflation period, things were going to hell in a handbasket and economists couldn't explain the contradiction of inflation and a slower economy. So they came up with a name and pidgeon-holed the phenomenon. I don't hear many economists trying to come up with a new name for this scenario, except maybe Roach, who keeps banging on the 'imbalances' drum.
ben- I watched "gold fever" the other day and he was in a mine in Arizona. he also was out in the desert with a metal detector looking for gold.
There are several small town in the state that may see mines open, too. Yeah, it's pretty cool seeing the prospectors rigs parked here and there. Most will tell you it's a hobby.

There are laws protecting the right to look for gold on the many public lands here. The original capital of the state, Jerome, was a copper mining town.
I grew up in Colorado, and always got a kick out of visiting the old mining towns. Went a ways into an old gold mine, too; the sparkling of the flakes in the walls was pretty cool.

Regarding stagflation, this is exactly what I've been saying all along. Prices on staples are going to keep trending upward, even as the economy's going down. Asset deflation will only be worsened by the fact that people have to commit a greater share of their income on energy, food, etc.
BTW, anybody notice that gold's almost back to $650 again?
You sure that sparkle wasn't pyrite? I lived in Ft. Collins for 10 years in the 80s and 90s and used to hike a lot around the 14'ers. Back then I met a few miners taking advantage of laws which had been on the books for over a hundred years. The Black Hills of SD is another place probably seeing increased activity.
Hell, I was very young and it was a tourist trap, so it could've been gold confetti for all I would've known! :-) It was a legitimate (albeit long closed) gold mine, though. They'd only let you go in a few hundred feet (horizontally), but the mine itself extended for thousands of feet in many directions.
When I was a kid, my parents took me to Costa Rica. We stopped to swim at a waterfall in the rainforest. The entire floor of the pond was half sand and half smooth pyrite. We sat under the falls and let the stuff run through our hands. I'll never forget it.
Today, for the first time, I saw a new gold shop open for business on San Pablo Ave in El Cerrito.

I came down to the bayarea for a visit from Reno, and see the gold fever starting to catch on. How exciting!

My friend here recalls during the last gold rush back in the late 70's seeing old lady carrying silver pieces in a bag to sell. She was horrorified thinking these antiques would be essentially melted down for their silver value.

I dont know for sure, but think we are along way from seeing people selling silver pieces to shops, but after seeing this new gold shop, I can tell there is definitely more interest than a year ago.
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