Could it be that the markets are sensing that inflation is becoming a real problem in America?  Are the big money boys finally starting to realize that the Federal Reserve is creating dollars out of thin air and it will become inflationary?  Maybe so.

Is that what the Fed is telling us?  Why else would Janet Yellen hint that the Fed will continue to pull back on its money printing operation with the goal of being out of the money printing business by the end of this year? Why did she say that after holding interest rates near zero for years? And that they will allow the federal funds rate to move up to 1.13% by the end of next year, and to 2.5% by the end of the following year?

I believe that we are being told this because the Fed is concerned about inflation and they are working to curb the approaching serious inflation before it happens. And if there is anything that gold thrives on, it’s inflation.

Even the manipulated BLS statistics are now pointing to inflation.

Prices in the U.S. economy increased by 0.03% in April and topped it with an increase of 0.4% in May. (Source: Bureau of Labor Statistics, June 17, 2014.) This increase in the Consumer Price Index (CPI) was the biggest in the last 16 months.

With the latest inflation data, inflation in is up 2.1% in the past 12 months.  If we assume that going forward, the new monthly norm for inflation will be the same rate we just witnessed in April and May (0.3%-0.4%), then in the next 12 months, inflation should reach 3.6%-4.8%. Gold loves inflation!

As the banks start lending, the velocity of money will increase and that just fuels inflation.

For the last 14 years, we have warned that sooner or later inflation in the U.S. economy would become a major problem.  After the last five years, inflation is finally starting to pick up. The perfect inflation storm is brewing as even the velocity of money picks up.

Gold is the best hedge against inflation. That’s why it’s an important part of any investment portfolio.