Gold rallied overnight in Europe, touching $1,310 in early New York trading. There is no end in sight to the simmering crisis in Ukraine, which is providing a floor to prices. This is beginning to spark some short covering.
The dollar is choppy this morning, just below yesterday’s closing price. The euro gained slightly on the dollar, but is at a two-month low versus the yen. The Yen is also up against the dollar.
More signs of disinflation in Europe has just about cemented the expectations that the European Central Bank will unveil some sort of quantitative easing policy at next month’s meeting. Consumer prices in Germany dropped 0.3% in March, and were up only 1.3% year over year.
Similar inflation fears in the U.S. are receding, as wholesale prices are surging. The Producer Price Index for April was up 0.6%, way higher than expectations. This is the biggest one-month jump in a year and a half, and follows a 0.5% increase in March. Year over year wholesale prices jumped 2.1% in April. Wholesale food prices spiked 2.7%, the highest rate of increase in three years. The wholesale price for meals soared by 8.4% last month, so expect a bigger bill when eating out.
Meat prices are soaring due to droughts in the West, and a viral epidemic that has killed off more than 5 million piglets. Instead of raising prices, meat companies are reducing the weight in packaged meat. You’ll find less bacon in that package for the same price, and lunch meat and hots dogs are also up for some stealth price hikes. Barron’s reports that U.S. cattle herds are at their lowest in in 60 years, and beef prices have doubled from their five-year average. Pork prices are up 40% from last year.
Wall St. opened lower in volatile trade this morning, after the S&P 500 and Dow edged to new highs yesterday. European stocks were steady, near six-year highs. The Nikkei was lower on profit-taking, while the Hang Seng closed at a three-week week high on real estate and banking stocks. Shanghai closed slightly lower on concerns about the domestic real estate market. The Peoples Bank of China urged banks to help first-time homebuyers secure a mortgage, as the residential real estate slumps due to speculators pulling out.