The monetary base grew at the highest rate in 50 years during the fourth quarter of 1999. While inflation numbers as measured by the Labor Departments PPI and CPI still appear tame, the precursors of higher inflation numbers are impossible to ignore for anyone not caught up in market mania. The Atlanta Fed finished prices index has increased sharply and the Euro PPI increased much more than expected in November. In this context, it should be remembered US average hourly earnings gains also appear to have bottomed out in recent months . Expect the sanguine low inflation, goldilocks economy, Greenspan is a genius mentality to be severely challenged in the current year.
Gold demand has three components.
These are fabrication for jewelry and industry, potential demand from short covering, and investment demand. Fabrication demand has grown steadily, especially for jewelry. Without it, gold would have collapsed under the weight of the short selling binge. It has counterbalanced the extremely negative investment sentiment of recent years. At 3,700 tonnes in 1999, it exceeded new mine production by over 1,000 tonnes.