Early Signs of Inflation?

Two different numbers out today are indicating the very early signs of inflation. Whether this is the start of the long-awaited result of the Central Bank money printing policies is unclear, but nonetheless, it needs to be noted.

The first of these was the PPI (Producer Price Index). The other was the Reuters/U Michigan 12 month Inflation Forecast and their 5 Year Inflation forecast. Granted the latter is a forecast whereas the former is an actual measurement but the big thing to take away from all this is that the mantra: "There is no measurable inflation" has been one of the biggest problems for both gold and especially for silver.

The PPI number for the month of May was an increase of 0.5% over April. Analysts had been expecting a mild 0.1%. It was the first increase in the PPI in three months.

The U of Michigan 12 month forecast was +3.2% while their 5 Year forecast was +3.0%.

We should note that once the University of Michigan numbers came out, silver, which was already bouncing higher today on the heels of the PPI, recaptured the very important technical chart level of $22. If it can hold those gains into the close, it will have dodged a major bullet.

I want to see how crude oil closes this week as it was the component of the PPI (energy prices) which saw the big jump. Thus far crude has been unable to breach $100 having only briefly punched through that level last September before fading. If it does, and this is unclear right now, it is going to be very difficult to keep gold under pressure.

Traders are going to want additional proof that the PPI was not an aberration before they get nervous about inflation but at least their complacency over this issue might have gotten a bit of a nudge. Interestingly and noteworthy I might add, the bond market seems utterly indifferent to both sets of numbers with the long bond jumping a full bond higher in a counter intuitive move. There are still a lot of cross currents with all the liquidity flows occurring right now that are clouding the looking glass making it difficult to get a really good read as to what exactly is the current thinking in the marketplace.

I have been consulting my magic 8 ball and asking it questions but the answer it is giving to all my queries is the same - "DUGH?"

Stay tuned.