Source: VantagePoint Intermarket Analysis Software
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If inflation rates rise as much as some analysts expect as a result of trillions of dollars of government stimulus money entering the economy, gold is one market whose prices are likely to go up in line with inflation rates.

Although China is reported to be buying gold and demand for gold coins and bars has been strong, gold’s price response so far has been relatively muted – certainly no gold rush yet. Gold prices have advanced about 8% in May, but futures traders have given more attention to crude oil, up about 30% in May; silver, up 23% for the month, and even soybeans, up about 13%.

Silver futures have exceeded their 2009 high and are approaching a 50% retracement of the decline from the March 2008 high above $21 an ounce to the October low of $8.40. Gold futures, meanwhile, have not exceeded their March high and are struggling to reach the $1,000 an ounce level again.

Intermarket analysis suggests, however, that gold could outperform other markets if the perceived inflation threat becomes a reality.

A leading indicator for gold is the price of gold mining stocks, which should benefit from a runup in gold prices. Individual mining stocks have their own issues that may not be known to many traders so picking the right company stock can be risky. However, a good gauge of sentiment about the outlook for gold can be found in the gold mining stocks exchange-traded fund (GDX).

Since its low last October below $16, GDX has more than doubled, reaching a high above $40 last week. The ETF was priced at nearly $57 in March 2008 before inflation became a big concern, so there’s room for its price to inflate further in the current environment.