The 5-year break-even inflation rate fell below 1.2% for the first time since the summer of 2010:

5-year_Breakeven_Inflation

This level of inflation expectations is certainly testing the lower bound of the FED's comfort zone. In fact the last time that the 5-year break-even fell below 1.2% the FED began floating the idea of QE2 and former Federal Reserve Chairman Bernanke gave his famous Jackson Hole speech (August 27, 2010) setting in motion an extensive quantitative easing program that would eventually balloon the FED's balance sheet to over $4.4 trillion:

FED_BS

Precious metals and mining shares launched higher beginning in August 2010 on a rally that would see gold +20% in less than 3 months and the TSX-Venture gain ~70% within six months.

A FED rate hike during 2015 is looking increasingly unlikely. In fact, is the FED about to increase its bloated balance sheet even further in another futile effort to stoke inflation expectations? Recent bullish bets on gold by hedge funds indicates there may be some shrewd market participants who are betting on just such an action by the FED:

Gold_COT

Source: Barchart.com