It's been a difficult time lately for hard asset investors as measured by the decline in the price of the spot gold index from its March high of approximately $445 to its recent low of $415. Some industrial metals took a hit as well, such as steel and aluminum. Crude oil came off its earlier high by about $10. All the while the Federal Reserve has continued its policy of raising its benchmark interest rate and the monetary aggregates have fallen to dangerously low levels.

But there are some early signs that this trend may be about to temporarily reverse. For one, the spot price of silver (often a leading indicator for gold) spiked from below $7.00 to slightly above $7.50 recently. Spot gold itself has risen off its earlier June lows from $415 to a recent high of $426.

The 10-year Treasury Yield index (TNX) recent broke below the lower boundary of its downtrend channel from March to send a "channel buster" exhaustion signal earlier this month. The internal indicators confirm this oversold position of the yield index and not surprisingly we've seen TNX rally off its lows a bit. I think we could see TNX climb even further up to the 4.3% to 4.4% area before the resistance starts showing up visibly.

While still a little premature, the initial boundaries of a short-term uptrend channel can be drawn given the little "heads-up" the yellow metal provided last week. Here is my rendition of this potential trading channel.

Now assuming the parameters of this channel are basically correct, what does this suggest to us for the gold price in coming weeks? At the least it suggests a move up to the upper channel boundary at the $430 area followed perhaps by a corrective pause and then perhaps further upward to the $435-$440 area where more resistance is likely to be encountered.

As previously documented here, we've entered essentially a "trading range economy" where downtrends in inflation-sensitive areas of the financial markets aren't allowed to fall below a certain point for the purpose of keeping deflationary pressures under control (after all, this is K-wave deflation we're still in). The converse of this also holds true (in order to keep inflationary pressures in check). This is all part of the push toward an integrated global economy. The final piecing together phase of the global economy required a certain measure of stability, which is why we've seen all these trading ranges develop in certain commodities.

With that in mind, the mini-deflationary trend of April-June has apparently run its course and it looks like a new mini-inflationary (or "reflationary" if you will) trend is underway.