Monetary Base and Excess Reserves

Here are two charts.  The first chart shows the adjusted monetary base.

The second chart shows the excess reserves held by banks (one year chart).[1][id]=EXCRESNS&s[1][range]=1yr

This tells us two things.  First, the two charts are almost identical.  Money created by the Fed is going to the commercial banks as excess reserves.  This means that the newly created money is not being lent out.  This is keeping price inflation down.

The other thing you will notice is that the Fed has had a policy of stable money for over four months.  This comes after the explosion in the monetary base in late 2008 and 2009.

Until this changes, you will not see massive inflation and you probably won't see a massive spike in gold.  You should always hold a portion of your portfolio in gold (say 20-25%) or gold related investments, but you will not see it go sky high until we see a change here.  If the economy hits another major downturn (which looks likely), then we may get a change in policy.  You should look for an increase in the monetary base or a decrease in excess reserves (without the same thing happening to the other chart).  Once you see the charts break the correlation, then you should really prepare for high price inflation.