Inflation Storm Coming

(…) The dollar doesn‘t look to be turning around – Thursday‘s upswing has been erased, but look for the greenback to reflexively rise when confronted with „taper now“ prospects. But is the Fed ready to welcome higher rates, and work towards them? I look for plenty of assurances that the support would be very gradually withdrawn so as not to affect the markets…Toothless compromises for public consumption fit into the picture greatly too…

Look, the $6T boondoggle is dead on arrival, and won‘t turn out nearly so in the end and fast enough, which would take a little pressure off the still hot inflation trades. Commodities, followed by silver, and finally gold would feel (by extent of reaction) the short-term pinch, but remember that inflation fires on two engines – and the job market one is arriving.

Commodities exerting cost-push influence, and job market pressures, would be a one-two punch to the transitory inflation arguments. Deflationary shock simply isn‘t likely at the moment – the market will more probably find out the Fed isn‘t as serious about taper as it pretends to be – the ostrich pose. Or we might be cushioned into a higher inflation environment actually (thank you, Janet), being told it‘s for our own good.

Gold is confirming yesterday mentioned point of being more vulnerable than silver to a scared dump, and the miners weakness still shows it won‘t be smooth sailing for the yellow metal either. And it isn‘t. Copper is worrying down even more, hinting that today‘s session will be far from a calm one in the bond arena. Remember though the big picture once again:

(…) the red metal‘s bullish bias is clearly there, both in the short run and medium-term as I had been stating months ago that you can‘t (attempt to) build a green economy without copper, silver, or nickel, among much else. It‘s massive and we‘re in a commodities superbull already – and the lumber arguments (not confirmed by timber weakness as I remarked) can be easily refuted by the $CRB index performance.

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