In addition to the Indian Central Bank's purchase of 200 tons of gold from the IMF, one reason for gold's strong rally today can be found in yesterday's ISM. In each month's Report on Business, ISM publishes the results of its monthly commodities survey where it asks respondents which commodities are rising in price and which are declining. In this month's survey, respondents saw price increases in eleven commodities and decreases in only one. This month's net reading of +10 brought the three month moving average to eleven and is the highest level since September 2008.
The chart below compares the three month average net reading in the ISM Commodities Survey (CS) with the year over year change in CPI. Over the last ten years, trends in the CS have often preceded moves in the CPI. So when the net reading in the CS rises, increases in the CPI are typically not far off. Therefore, given that the net number of commodities rising in price is currently at +10 from a low of -15 in February, don't be surprised if upcoming inflation reports come in on the high side of expectations.
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