So I Guess Gold Was Right….

The price of gold has been dropping pretty sharply recently. According to my gold model, that must mean the real interest rates have been on the rise. Since short-term rates are still close to 0%, that means that we’ve been experiencing deflation.

This morning, the government confirmed that’s exactly what’s been happening. Consumer prices fell 0.4% last month which is the biggest drop since 2008. It’s also the second-straight monthly drop. The annualized rate of deflation over the last two months was -3.27%. In effect, the Fed has raised interest rates.

Here’s a look at the price of gold. In September 2011, the yellow metal peaked at $1,923 per ounce. Now it’s at $1,385.

Posted by Eddy Elfenbein on May 16th, 2013 at 10:12 pm

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