There's Inflation in Them There Surveys! -- AND -- Gold's action made sense to us yesterday...

Once again, the Institute for Supply Management Survey respondents are telling us there is indeed some inflation out there. Thing is, we, as of yet, haven't seen much in the headline indicators; which, by the way, (PPI and CPI) are set to report next week. 

I suspect, if not next week, soon, those headline indicators will offer yet more justification for those Fed board members who want to push rates notably higher in the coming months (futures are pricing in a virtual 100% chance of a quarter-point increase next month).

While rising interest rates are generally not good for stock prices, at this juncture, a bit of inflation -- and higher trending interest rates -- will likely, in the aggregate, be welcome. Financials, in particular, should like it, if, that is, higher rates show up on the longer end of the curve as well. Sectors that would suffer in that scenario would likely include utilities and reits; home builders might take a step back as well.

In our last two weekly messages (here and here) we addressed what we view as the market miscalculating the prospects for bonds and gold. Our sense is that their year-to-date gains are inconsistent with present economic reality. If we're right, there doesn't need to be an obvious catalyst to send the two notably lower; all it takes is for traders to succumb to our way of thinking.

Lo and behold, yesterday we saw what was termed, "Mysterious 4 million ounces of gold trades trigger price plunge":

“We didn’t see any headlines, any news to make gold drop $10, but it just did,”Miguel Perez-Santalla, a sales and marketing manager at Heraeus Metals New York LLC, said in a telephone interview. 

Now, make no mistake, gold may absolutely soar come Monday, but for the moment, clearly, some big money is, in our view, finally seeing the marketplace as it should presently be seen.

Here's Bespoke Investment Group on the ISM surveys:

• In the Manufacturing sector, the October ISM noted increases in the prices of 26 commodities and declines in just two. The net reading of +24 was the highest single month reading since February. 

• In the Non Manufacturing sector, 28 commodities were up in price and six were down for a net reading of +22. The last time the monthly net reading was higher in the Non-Manufacturing sector was back in April 2012! 

• On a combined basis, 54 commodities were up in price during the month of October, while just eight were down. That net reading of +46 is the highest monthly reading since May 2011, and the three month average is the highest since July of the same year.