BLAME speculators, poor weather, global demand, or the Federal Reserve as you choose. Either way, sugar's up, wheat's up, and cotton's new record highs are starting to hurt Chinese textile makers.

Hence this bale in the wind. Clothing and footwear prices to UK consumers rose year-on-year in September for the first time since March 1992, hitting a two-year high in absolute terms.

Yet only now do central bankers fear deflation ahead. C'mon...where do they find these people?

"The longevity of what appears to be a speculative bubble in cotton prices," will determine 2011 profits at UK clothes retailer Next, it warned this week, adding that rising costs will force it to raise shop prices.

Over in China – which uses some 40% of the world's raw cotton output...and accounts for one-third of global textile exports – textile manufacturers face a "shortage of raw material", said industry group the China Federation of Logistics and Purchasing meantime, with last month's record-high prices "endangering" their survival.

For our money here at BullionVault, we'll blame loose monetary policy...and not just from force of habit, either. The Pound Sterling, like the US Dollar, looks further than ever from paying a positive real rate of interest – leaving both savers and merchants to price scarce resources in ever-depreciating, ever-more generously supplied currencies.

Short of an about-turn in monetary policy, the near-halving of UK clothing and footwear prices since 1989 appears finished.

Shop – and invest – accordingly.

By Adrian Ash

BullionVault.com

Gold price chart, no delay | Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

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