Inflation Expectations Roar Post Futures Expiration

One day before the end of the Month/Quarter and the markets were back in risk-on mode thanks to the expiration of futures contracts that had moved so much during the month that damage to various institutions charged with keeping things well-mannered had to be limited.   This is why there was a failed breakout of Gold and Silver last Friday and why there were multiple raids on their prices on Monday and Tuesday.  It happened in the oil markets as well to the point that bearish calls were coming out of the woodwork to profess the end of the oil bull as well.  Gold Popped to $1780 where it was capped for the rest of the day while Silver moved right back to the $34.70 area it has traded near for almost two weeks. Oil jumped $2 back over $92.00 for West Texas Intermediate while Brent Crude moved safely back above $112 per barrel.

Those calling for oil prices to slide based on fundamentals refuse to understand the impact of the breakdown of the petrodollar system which is happening with startlingly speed, and which is truly what will precipitate an attack on Iran, the size and scope of QE and the changes that have occurred in the U.S. monetary system.  M1, M2 and MZM have exploded in recent weeks along with the M1 multiplier.  Bernanke finally has the flow he wants which will ignite a round of inflation in the context of QE that may be frightening.  Gold, Silver and oil will all perform very well regardless of underlying economic conditions in the West.  I expect to see all of them rally into the month/quarter end and inform everyone that inflation is coming.  $1800 gold tomorrow is easily within the realm of possibility.


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Tom Luongo

About Tom Luongo

Tom Luongo is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.

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