GOLD CONSOLIDATING FOLLOWING CPI REPORT

Gold prices have consolidated below $1,200 per ounce on the New York Spot Market as of 1:10 p.m. EST as inflation risk waned following the release of the latest Consumer Price Index Report. While the core CPI was higher than expected, the overall report suggested to traders that deflation is very likely in the coming months.

Stocks continued their decline Friday as the Dow plunged more than 200 points in early trading on the New York Stock Exchange. The CPI report and weaker-than-expected quarterly revenue from General Electric, Bank of America and Citigroup raised concerns about the strength of corporate profits. Low inflation is not encouraging people to invest or save their money, according to Bob Tull, chief operating officer of Old Mutual Global Index Trackers. Instead, their money goes to paying off debt, he said, which does not drive the economy. "It makes no sense really to save, because there's no yield," he said. "You see people paying off their debt, because at the end of the day, [paying off] their debt is the best yield they can get." (CNN Money, 7/16/10)

“Gold isn't necessarily being viewed as either a deflation hedge or an inflation hedge, but more likely a flight to safe currency or real money,” according to market analyst Michael Berry. “In other words, gold is becoming money because of what people are finally beginning to understand,” he said. “People distrust the euro. They really don't trust the yen. They don't trust the Chinese yuan; and people are slowly but surely losing trust in the U.S. dollar.” Berry also believes silver is “undervalued” at current prices and that investors would be wise to acquire both metals in their portfolio. According to Berry, fiat money is going “the way of the wind.” (The Gold Report, 7/16/10)