Only the truly deluded believe that the core consumer price index released for the U.S. on Tuesday has any true meaning. Only those trying to rationalize the continuation of the hedge fund bubble in U.S. financial markets give it any consideration. The core CPI is the "WMD" of the Federal Reserve's inflation commitment. According to one of the pseudo gurus on CNBC that day, 40% of core CPI is the nonsensical housing measure. Did you buy or rent a house in the past month? Did you buy gasoline in the past month? Did you buy food in the past month? The reason, the only reason, that the dollar price of energy and food is rising is that too many dollars exist in the world. The world has been accumulating dollars for a decade. Now they are spending them. True inflation, the loss of purchasing power, is far closer to the head line number than the any other measure.

$Gold's price is an indication of purchasing power of U.S. dollar and an assessment of economic performance. This week's chart compares returns on $Gold and U.S. paper equities over past 9 years and 10 months. At end of June 2007 we will be able to look back on a ten year history where the investment return on $Gold was superior to that of U.S. equities. Talk about grand productive nature of U.S. economy will then be judged as simply the blathering of paper asset peddlers. What will managers say when clients come in with this chart and ask, "Why is my account all in paper, without any Gold?" How will the manager explain the inferior performance of their portfolio?

GOLD THOUGHTS come from Ned W. Schmidt,CFA,CEBS, publisher of The Value View Gold Report, monthly, and Trading Thoughts, weekly. To subscribe to these publications go to http://home.att.net/~nwschmidt/Order_Gold_EMonthlyTT.html. The May issue of The Agri-Food Value View, an exploration of unfolding agriculture and food investment super cycle, is now available.. To receive a copy, write agrifoodvalueview@earthlink.net.