November 19, 2007


Annual Inflation Surge Should Continue

Inflation-Adjusted (SGS)Peak Gold Price Is $6,030


PLEASE NOTE: Despite good intentions and a nearly finished missive, the November SGS newsletter will not be out today. Given this week's Thanksgiving Holiday, and pending housing data releases that will enhance the timeliness of this month's Reporting/Market Focus on the housing industry, the newsletter will be put out over the coming holiday weekend. Based on subscriber request, we are pleased to introduce an Inflation Calculator that enables one to calculate the relative inflation-adjusted value of a given price for any month in the last 94 years, in terms of any other month in that period, using both the official BLS CPI-U as well as the SGS-Alternate CPI. The calculator is available at under the "Inflation Calculator" tab. The October SGS-Alternate CPI and the updated October SGS Ongoing M3 both have been posted on the Alternate Data Series tab at -- Best wishes to all for a very Happy Thanksgiving! John Williams

October Annual CPI Inflation Jumps to 3.5%. The Bureau of Labor Statistics (BLS) reported the seasonally-adjusted CPI-U up by 0.29% (0.21% unadjusted) +/- 0.12% for the month, following September's 0.27% (0.28% unadjusted) increase. Against last year's overestimation of falling energy prices, annual CPI inflation surged to 3.54% in October, up from 2.76% in September and 1.97% in August. With the adjusted November 2006 CPI reported up just 0.05% for the month, any monthly increase in November 2007 CPI beyond 0.05% will add directly to October's annual inflation rate.

October's CPI inflation was enough to turn the monthly 0.2% October retail sales growth into a 0.1% contraction, after adjustment for inflation.

Annual inflation for the substitution-based Chain Weighted CPI-U (C-CPI-U) was 2.99%, up from September's 2.31%.

Adjusted to pre-Clinton (1990) methodology, annual inflation was about 6.9%, up from 6.1% in September, while the SGS-Alternate Consumer Inflation Measure (1980 methodology) showed October's annual inflation at roughly 11.1%, versus 10.4% in September.

Gold Price Still Well Shy of Inflation-Adjusted Peak. At subscriber request, we are publishing estimates of the January 1980 gold price peak (London afternoon fix) of $850.00 per troy ounce in terms of today's dollar. The thinking behind the request was that since central bank intervention and manipulation have been used to depress the price of gold over time, what could have been expected in terms of the current gold price if inflation were truly and fully reflected.

As can be determined using the Inflation Calculator referenced in the opening note, inflation-adjusted peak gold would be $2,283 per troy ounce based on October 2007 CPI dollars, and $6,030 per troy ounce in terms of October 2007 SGS-Alternate CPI dollars. The suggestion is that the price of gold still faces some catch-up.

Further details will follow in the November SGS newsletter.


The November SGS will be posted over the Thanksgiving weekend. An e-mail advice will be made of its and any intervening Flash Update/Alert postings.