Gold Rout Continues [Gold prices have plunged some 11%, or $170 an ounce, over the past week....]

Wall Street Journal ^

[Sub-Driver]

Gold Rout Continues By CLEMENTINE WALLOP, BIMAN MUKHERJI and FRANCESCA FREEMAN

Gold continued to take a battering on the spot market Monday, shedding nearly another $100 per troy ounce after weaker than expected data on Chinese first quarter growth sparked a new wave of selling on concerns that China and India, the world's two biggest buyers, may slow purchases.

The price of gold slumped to $1,400 an ounce in what appears to be panic selling after China’s first-quarter growth came in lower than expected. Other markets were also hit, with silver and other commodity prices and currencies like the Australian dollar are falling too. Photo: Bloomberg

Around midday in Europe, spot gold was down 5.2% at $1,404 a troy ounce, having earlier tumbled around $95, or 6.4%, to a two-year low at $1,385.88/oz. This follows Friday's rout, when the metal fell 5%, pushing it into bear-market territory.

Gold prices have plunged some 11%, or $170 an ounce, over the past week.

Worries are spreading that Asian buying, which has helped prop up gold prices for years, may be fading. China reported its economy unexpectedly slowed last quarter, spurring fears that Chinese consumers, faced with less cash, may stop purchases. In India, the largest gold industry group warned that the country is losing confidence in the metal because of the recent slide. Investors in Europe cashed out of the metal en masse amid concerns that U.S. stimulus may be cut short, and following news that Cyprus may sell a chunk of its gold reserves to fund part of its bailout package.

"The market saw gold going lower and everyone panicked," said Pradeep Unni, head of research at Richcomm Global Services, a Dubai-based commodity broker. "The most important factor for gold now is Indian and China demand."

[bert]

-——what is holding inflation at the pace it is at?-——

One large factor in the inflation equation is wages. Wages are being held down by unemployment. In strong demand, wages reflect the supply and can rise. When there is an excess of workers, the cost can be stable.

There are two administration efforts to raise wages.Raise the minimum wage and increase the wages on union contracts.

[littleharbour]

What is keeping inflation from hitting the US is the weakness in the European and Asian economies. Right now the American dollar remains the world’s leading currency, because so many other currencies are weak. The situation is like a volcano. The pressure continues to build, but the top hasn’t yet blown off. When it hits, it will be sudden and massive. I am old enough to remember how quickly inflation spiralled in the early 70s.

[MrB]

Isn’t it that the velocity of money is at a near stagnation rate
that is keeping inflation down?