Robert Kelner poses a question: "The rate of increase in the number of dollars it takes to buy goods has slowed significantly. The rate of increase in the amount of gold it takes to buy the same goods has accelerated. Discuss."
He's referring to the Bureau of Economic Analysis's release from this morning on personal consumption expenditures, or PCE, a measure of inflation that is closely watched by the Federal Reserve. The PCE number shows victory in the Fed's battle against inflation: "From the preceding month, the PCE price index for November decreased 0.1 percent (table 5). Prices for goods decreased 0.7 percent and prices for services increased 0.2 percent. Food prices decreased 0.1 percent and energy prices decreased 2.7 percent. Excluding food and energy, the PCE price index increased 0.1 percent."
Meanwhile gold is up above $2,000 an ounce. Leave aside the matter of "rate of increase" versus actual level, and the difference between a survey of last-month's prices and a current spot price in a liquid market. What can we expect in terms of the purchasing power of dollars, in either goods or gold? One indicator is reporting slowing inflation (or a more stable dollar), the other signaling rising inflation (or a weaker dollar).
If readers have theories or answers, the comments are open. I see two possible explanations, which are a bit related.
First, gold is a safe harbor in times of global turmoil in a way that many of the PCE goods and services (apartment rent, restaurant meals) are not. If you think 2024 could bring a regional war in the Middle East that shuts down shipping lanes, or a China move against Taiwan, or a Trump victory in an American election that is met with violent street protests in response—you might buy gold in anticipation of that, but you wouldn't necessarily rent a pricier apartment or spend more on fancy restaurant meals.
Second, and relatedly, there's a bit of future expectations about dollars built into gold prices in a way that isn't necessarily built into the goods and services measured in PCE. If some institutional investor thinks the Fed is going to cut rates and Congress is going to spend money in a way that weakens dollars, they might move some money out of cash and into gold, but as a practical matter they might be less likely to go out and personally buy enough canned food and gasoline that it has a measurable effect on the PCE as the government tracks it. There are obvious exception to this in periods of runaway inflation or when preppers are stockpiling scarce goods and driving up prices, but that is not where we are now.