American Growth

The president of the St. Louis Fed, James Bullard said that the American economy is nearing normal and a return to business-as-usual monetary policy is in the offing. Essentially, he's calling for higher interest rates sooner, rather than later.

Bullard claims that inflation (even by the standards of government statistics), is nearing the Fed-set target.

In his interview with Reuters he seemed to gloss over the fact that the unemployment rate is still stuck at 6.3%, despite the creation of 217,000 new jobs in May. So, we are probably looking at the need for 225,000 new jobs per month before we get a downtick.

Additionally, The National Assn. for Business Economics revised its forecast from March when it projected the economy would grow at a 2.8% annual rate in the second quarter. It says now that the economy in the second quarter will grow at a very robust 3.5%.

Moreover, it is predicting that growth for Q's 3 and 4 will slightly exceed 3.1%.

These two sets of statistics bode two things for gold.

The first is that interest rates probably will rise sooner than later, which is not a great sign for gold. However, that inflation will probably kick in well before the FOMC is able to raise rates with a good conscience and have the effects of such a raise penetrate performance and inflation.

And that is good for gold, because inflation is a gold (and silver) bull's good friend.

We can see some of the effects on gold and silver today of these and similar prognostications. How?

In regular trading, both precious metals are up but dollar strength is undercutting those gains.
The dollar is up around 0.4% at 4 PM New York time. It is showing meager strength against the yen and pound.

As always, wishing you good trading,