Frank Holmes joins Lawrie Williams, Koos Jansen and many others in questioning the “official†Chinese gold demand numbers. Real gold demand is likely much higher than the official numbers.
by Frank Holmes
Inflation just got another jolt, rising as much as 2.5 percent year-over-year in January, the highest such rate since March 2012. Led by higher gasoline, rent and health care costs, consumer prices have now advanced for the sixth straight month. In addition, January is the second straight month for rates to be above the Federal Reserve’s target of 2 percent.
Air fares are also climbing, and speaking of air fares, billionaire investor Warren Buffett added to his domestic airline holdings, we learned last week. Buffett’s holding company, Berkshire Hathaway (BRK-A), is now the second-largest holder of American Airlines (AAL), with an 8.79 percent share of the company. It also increased its holdings in Delta Air Lines (DAL) by over 800 percent, to 60 million shares. The company now owns 43.2 million shares of Southwest Airlines (LUV), and it increased its stake in United Continental (UAL) to about 28 million shares.
A March rate hike now looks all but imminent. Many economists—including the Goldman Sachs economists I had the pleasure to hear speak this week—expect to see at least three such hikes this year alone.
Gold responded accordingly, closing above $1,240 for the first time since soon after the November election. Below you can see the gold price charted against the inflation-adjusted 10-year Treasury yield, which is now in subzero territory.
The question I have is: Why would an investor deliberately choose to lose money? But that’s precisely what’s happening now with inflation where it is.
| Â | 2-Year | 3-Year | 10-Year |
|---|---|---|---|
| Treasury Yield | 1.22% | 1.95% | 2.45% |
| Consumer Price Index | 2.50% | 2.50% | 2.50% |
| Real Yield | -1.28% | -0.55% | -0.05% |
|
As of February 16 |
Source:Â Federal Reserve, U.S. Global Investors |
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