Tuesday, April 17, 2007


Lower Clothing Prices Keep Core CPI In Check

WASHINGTON (Dow Jones)--A sharp drop in apparel prices and soft gains in housing and medical costs kept underlying inflation in check last month, a government report showed, though overall inflation accelerated on the back of higher energy prices.

Somebody please pinch me, I can't stop laughing. Lower clothing prices? Lower clothing prices can mean only one thing...Sales. Sales as in discounts...and lots of them. If there is one rule when it comes to buying clothes..."never pay retail". Interesting to note that second to the +3.1% increase in gasoline sales last month was clothing sales +2.4%. I guess folks were buying a lot of cheap clothes last month. I'm not sure. I hate shopping for clothes.

Oh my, look. The US Dollar was down again today. 8PM est and the US Dollar Index stands on crutches at 81.63. Not even the expected spin on the numbers could put a bid under this sick puppy: "The Federal Reserve has been forecasting that inflation would move back into its comfort zone on its own," without the need to tighten monetary policy, says Stuart Hoffman, chief economist at PNC Financial Services in Pittsburgh. "It's not yet in their comfort zone, but its getting close to that." Sure today's +0.6% CPI number was inline with forecasts, but folks it was higher than February's +0.4%. Inflation is rising no matter how you try to spin it.

And no matter how poorly you report the numbers, inflation is rising as well. From thestreet.com: The Labor Department says the core rate of inflation, which excludes volatile food and energy components, fell to 0.1% in March from 0.2% in February. Um, not exactly.

Consumer prices were 2.8% higher than a year earlier, according to Tuesday's report, while core prices advanced 2.5% from a year ago, down from last year's peak of 2.9%. Over the last three months, the core CPI has risen at a 2.3% annualized rate. The Fed wants inflation at 1.5% to 2%.

The Fed tends to focus on core inflation when assessing price risks, but there's a danger that higher food and energy-driven price gains could filter through to underlying inflation by pushing expectations higher. Indeed, the Reuters/University of Michigan one-year inflation expectations reading for mid-April, released last Friday, rose sharply to 3.3% from 3.0% in March. Energy prices last month increased by 5.9%, according to Tuesday's report. Gasoline prices jumped 10.6%. Natural gas prices advanced 3%, while electricity prices rose 0.5%. Food prices, meanwhile, increased 0.3%.

It is getting ridiculous the number of people in and out of the government who try to "tell us" that inflation is under control. It isn't...and it isn't going to be anytime soon. The bottom line is this: INFLATION IS BAD, BAD, BAD for the US Dollar. And that in turn is good for Precious Metals.

April 17 (Bloomberg) -- Gold in New York fell from an 11-month high on speculation that a six-week rally was overdone. Silver also declined. This is absolutely irresponsible commentary/reporting. Simply put, whoever wrote this couldn't figure out the metals mettle today. Gold and Silver are merely consolidating their most recent gains and taking in all of this weeks data. I believe options expiration is Thursday, is it not?

Click on the chart above to enlarge. This is a daily chart of the US Dollar Index for the past three months. The dollar has become dangerous now. It's at the bottom of it's downtrend channel and technically it is beginning to look oversold as well. The falling dollar is getting a lot of press lately, and when the bet becomes too "one-way" a reversal could be imminent. There's little out there right now to put a any wind in the US Dollars sails, but we don't call 'em RAT BASTIDS for nothing. The balance of the month will be light on economic data, and sentiment is negative on the US Dollar. Technically we may be setting up for a little bounce before the dump to 80 on the Index. Beware the PPT.

Silver Resistance: 14.04 / 14.12 / 14.30

Silver Support: 13.95 / 13.85 / 13.67

__________________________________ All Prices are SPOT

Gold Resistance: 688 / 691 / 699

Gold Support: 686 / 681 / 677

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