The inflation hawks circle: For U.S, it's cut the budget deficit, or else

By Money Matters Editors

Now the road gets a little bumpier. For years, the United States ran large deficits with near impunity - with low inflation and relatively low interest rates. That may be starting to change.

On Tuesday, investors bid-up the price of gold to a record high close of $1,033.90 per ounce. Gold had hit an intra-day high of $1,045 per ounce earlier in the day. (To view a price chart for gold click here.)

Historically, institutional investors (IIs), bid-up gold when they sense that inflation will re-heat in the quarters ahead. The culprit in Tuesday’s rally was the former, and also some chatter that there may be a move to price crude oil using a basket of currencies or a basket of currencies plus gold – either of which would be bearish for the dollar. Some major economic leaders are growing increasingly concerned about possible further weakness in the dollar and a rise in inflation, due to the U.S.’s large plus-$1 trillion budget deficit.