Capital Gold Group Report: “Gold’s Best Friend Stagflation is a Real and Growing Threat”

Gold for June delivery rose $15 to $947 an ounce on the New York Mercantile Exchange.

Other metals prices also posted strong gains.

“With oil and commodities surging, the dollar continuing to weaken and economic growth slowing, gold’s best friend stagflation is a real and growing threat to much of the global economy,” said Mark O’Byrne, executive director at Gold and Silver Investments Ltd., in a research note.

The precious metal will likely challenge recent resistance at $950 in the coming days “as investors realize that inflation is not some short-term phenomenon, but rather a medium and possibly long-term problem yet to be priced into the market,” O’Byrne said.

On Tuesday, gold ended up $3.30, or 0.4%, to $932 an ounce.

On the currency markets, the dollar remained under pressure against most major counterparts, not getting much help from U.S. data after falling to a new record low against the euro earlier.

The dollar index, which tracks the performance of the greenback against a basket of other major currencies, fell 1% to 71.30.

In economic news, the Commerce Department reported Wednesday that U.S. home builders started the fewest homes in 17 years, as housing starts plunged 11.9% to a seasonally adjusted annual rate of 947,000 in March.

March’s rate was the lowest for housing starts since March 1991. Starts were down 36.5% compared with March 2007. The starts figure was much lower than expected on Wall Street, where economists were looking for a drop to 988,000 annualized units.
 

Separately, the Labor Department reported that inflation rose in March, as energy and food costs gained. After virtually no change in February, the consumer price index in March rose 0.3%, matching estimates from analysts surveyed by MarketWatch.

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