GLD and the $CRB

Gold is a hedge against inflation. Gold is a hard asset. In chemistry, gold has the symbol Au and is number 79 on the periodic table of the elements just under silver and copper. But what makes gold valuable is demand, and when prices are rising paper money is worth less and gold becomes worth more. Therefore, the price of gold is directly related to inflation (and demand).

GLD is an ETF that trades at approximately 1/10 the price of gold. It is easy to trade on the stock market and to use to watch the price of gold. Because gold is also a speculative commodity its price can jump more than is due to current situations.

The $CRB index is a commodity price index. It was first calculated by Commodity Research Bureau, Inc. in 1957. The index was originally comprised of 28 commodities which were traded on exchanges in the U.S. and Canada. It has had several revisions since then and is now I believe composed of 17 commodity prices. Since prices tend to go up together it reflects on inflation. For background and history see see here.

Compare the two charts below and you will notice some similarity. While gold has moved more to the downside comparatively that could be due to the speculative nature of gold. In any case it would appear that inflation, which hit a high last month, is on the decline. Both charts are 6 month daily charts with Simple Moving Averages. Click on charts to enlarge.

GLD

$CRB