*****gold on the precipice***, page-22

re: *****gold on the precipice*** to grant62 Hi Mode,

The effect here could well be felt in a rising gold price.

If gold retains its traditional role of being a store of value, then rising inflation will also be reflected in a rising gold price. However, before the gold "bulls" run away with this argument, it should also be remembered that a rising gold price generally translates to a leading indicator (ie: of future inflation).

Previously, I have argued that gold's fundamental value was in the $320 - 340 range (ie: $320 at the beginning of the year, vs $340 at the beginning of May). The current price of gold remains above this, and there is little or no war or terror premium built into the price. If, then a $357 (or higher) "average" price is sustained through into July, then this would also point to inflation rising during 2H03.

In my view, any continuation of gold around $320 points to continuing inflation, whilst anything above $320 points to rising inflation (once you have stripped away any lingering war or terror premium).

With an improving economy, and growing physical demand, gold could well also increase in value, but on this score, I would not attribute too much of a rise in the PoG to this (ie: a modest 5 - 7.5% rise, measured against a relevant baseline).