With Traders Complacent, Precious Metals Drop on US Data

Precious metals decline across the board on 16% housing start increase

Bullion.Directory precious metals analysis 19 August, 2014
By Christopher Lemieux
Senior FX and Commodities Analyst at FX Analytics

Precious metals declined across the board as US housing starts increased almost 16 percent, the highest jump in eight months.

The consumer price index (CPI) increased .1 percent, but the limited inflation pressure left traders no reason to dump safe-haven assets.

July’s consumer price data increased at the slowest pace in five months, while gold futures teeter over-and-under $1,300 per toz.

Silver prices dipped over 1.25 percent, sending the price below $19.45 per toz.

“Today’s CPI number shows that inflation is not raising and you don’t need to hedge against inflation,” said Blake Robben, senior strategist at Archer Financial Services.

Keep in mind, inflation went from 1.1 percent in March to 2.1 percent in June this year.

Nevertheless, inflation has been at or above the Fed’s two percent target and forecasts show that inflation could begin to creep near three percent by the time the central bank is expected to end quantitative easing.

And take it from the Bank of Japan, uncontrolled monetary policy doesn’t go without its consequences.

Inflation can jump at a moment’s notice, and it is likely that Janet Yellen & Co. are unprepared to deal with any significant increase in inflation should the ever-increasing money supply enter circulation.

Nobody purchases medical insurance after they break their leg because they either cannot get it or it is too expensive. So, why would anyone purchase inflation insurance (precious metals) after inflation climbs higher?

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