Inflation should be something to worry about

The Fed calls for a 2% inflation target, when January core CPI is already 2.3%, with headline at 2.9%. BOE, BOJ, EU bailouts and potential QE3 are all inflationary measures by central banks to prevent dreaded deflation. The hidden plot behind inflation is the fact that China is moving away from export/fixed asset driven growth to domestic consumer driven growth.

GLD is currently at 2012 lows but I've learned, especially in gold, that you buy when it's ugly, not when it's pretty. QE3 is the short-term driver of gold. However, if the economics get better in the US, one would expect inflation to rise higher and the Fed would need to raise rates rather rapidly in order to catch up with inflation (already in negative real rates environment). With the longer term China story intact and potential EU bailouts very likely, really the only plausible way I see commodities not moving higher is if the world moves towards deflation, which every central bank has positioned themselves against.