Wednesday, September 19, 2007

Inflation?

Who know's what will happen. But when you have signs of it, it should be brought to light. Gold has been increasing a lot lately which isn't a good sign. Sure, people are making money but for the overall economy the rise of Gold in my opinion is not a good thing to see rise. It represents Fear and Inflation. Bonds are still increasing along with Gold, a bad combination since Bonds generally represent the opposite of Gold.

 

When you have Bonds rising along with Gold to me those are signs of a bearish market or signs of one is coming. Even with the fud rate cut both are still rising. CPI index today was lower than normal. Now, it wasn't a whole lot lower, but it was lower. Is this the beginning stages of inflation in the future? I don't know. But I'm keeping a close eye on both Gold and Bonds. Ideally, I want to see Gold start declining over the next couple months while bonds steadily climb.

 

As you can see from the charts below, Bonds were declining in May and June ahead of the August mortgage crisis while Gold was increasing in June and July ahead of the mortgage crisis. A good sign a bad thing is coming, and it did. Now we have both starting to climb together and Bonds even look like they're declining a slight bit this month, another bad sign. Who knows...

 

 

 

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edit: Decided to throw a chart of the S&P 500 in here since it's a good indicator of things to come compared to Bonds. Bonds look to be declining slightly according to the chart above, while the S&P 500 is rising in the same time frame. The fed cut rate skewed the results but if the S&P keeps up this upward climb while Bonds slowly decline and Gold keeps increasing. A perfect setup of a bear market. I'm not predicting anything as I don't know what will happen, but keep your eyes peeled, I know I will.

 

 

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