Yesterday was the end of some short-lived rallies as stocks fell back from their record highs and the dollar index retreated back to pre-Brexit lows. In the long term, these changes are showing the dollar continues to lose its purchasing power due to central banking’s bad fiscal policy. As the dollar declines, gold prices are likely to respond with upward movements throughout the remainder of the year.

The Bloomberg Dollar Spot Index halted a drop of up to 1.2% after William Dudley, Federal Reserve Bank of New York president and chief executive officer, said policymakers could potentially raise interest rates as soon as next month.

The dollar has lost ground over the past month as lackluster data in the world’s biggest economies fueled speculation the Fed would be slow to raise borrowing costs.”

Core CPI Numbers

Aside from a weak dollar, today we got another reminder that inflationary pressures are continuing to mount. Despite the Department of Labor’s Core Consumer Price Index (CPI) numbers showing inflation stagnating, real inflation is alive and well.

As Peter Schiff has pointed out many times, CPI is no longer a tool to accurately measure inflation, but an instrument of propaganda used by the government to hide accelerating inflation from the public and financial markets.

Modest CPI increases over the past several years do not reflect an absence of inflation, but a design flaw in the index that fails to fully capture the magnitude of price increases. Central bankers drawing economic conclusions regarding inflation and monetary policy based on this highly flawed data point are making a major policy error. If CPI shows inflation is stagnant, then be assured it’s actually growing at a healthy rate.

Bullish Gold and Emerging Markets

While US stocks and the US dollar fell, gold rallied for a second day and emerging market currencies hit their strongest level in more than a year. Stocks from those nations gained for the ninth day in a row.

Gold rallied because investors are looking for a safe haven to combat the continued monetary easing that is likely to come in the form of another rate cut or more QE before the end of the year.