At the end of last month, Charles Delvalle at Investor’s Daily Edge said what we’re getting ready to see is not inflation at all… but deflation. That’s because in July the money supply grew under the rate of inflation. In real terms, that means the money supply shrank. Charles says data now suggests shrinking money supply is putting the brakes on inflation.

In August, producer prices fell 0.9 percent thanks to the big drop in energy prices. Now, if the prices producers are paying each other are dropping, then we should see a small drop in consumer prices.

Lo and behold, consumer prices for August fell 0.1 percent. Gasoline prices fell 4.2 percent, and fuel oil prices fell a massive 9.6 percent (the most in five years).

As the economy continues to slow, we will continue to see drops in inflation readings. As inflation wanes, the attractiveness of gold and silver will wane with it. And this should give the Fed some more room to continue dropping rates.

While I’m not calling an end to inflationary times (or the bull-run in precious metals), we should see a slowdown over the next 12 months.

Source: The Slow Unwinding of Inflation