Oil is priced in dollars, and has collapsed.
Gold is priced in dollars, and has gone up and up.
Dollars, they're soaring like they'll be the only currency left.
Worldwide oil demand had dropped 1.2%. That's it. But oil prices are down 73%. Non-investment gold demand is cratering - down 10% for industrial and dental, down 6% for jewelry. While investment gold demand is surging - up 182% in Q4 '08. And on the dollar side, the US will be borrowing $2.5 trillion this year. $2.5 trillion. While the Fed expands its balance sheet another trillion, floods the world with dollars, and is about to start buying up US bonds.
Do some research here folks, and report back. I don't know where oil and gold go from here, but something doesn't feel right. It's the ratios. And also the dissonance of looking at the oil chart in dollars vs. the gold chart in dollars and then of course the dollar chart in yen or euros or for that matter zloty.
Reading the MSM, and going with the trends, you'd be long gold and short oil. All I see are bull stories now on "here's how to buy gold" and all I see are "the end of oil" stories on the black stuff.
But my gut is now saying something different, even though I can't make a case. Something just doesn't feel right. I can't put my thumb on it, but something doesn't feel right.
But hey, "doesn't feel right" is the new normal, wouldn't you say?
Posts
45 comments:
Eating multinational corporation agribusiness products is like eating ...... Well watch the video...
nsfw
http://www.youtube.com/watch?v=NiZ9xw9-NBo
Simple Keith.
1. Oil is a commodity that is consumed. People need money to consume. People are broke.
2. Gold is a medium of exchange more than it is a commodity that is consumed whether by end consumers or industry. Hence the lower prices for platinum, palladium and silver. Gold is the "neutral" currency. Why do you think the governments have so much of it?
Other interesting tidbits when it comes to gold.
1. If I buy gold now from my dealer and pay cash, I must present ID and my information is taken. This was not the protocol even 2 months ago. It's not like I'm trying to hide it from the government, I just don't know if I can trust a potential disgruntled ex-employee knowing my address. I don't even have that much gold and the government already knows I own gold as I've ordered a couple coins from the mint.
2. The mint has really cut down on it's PM offerings. No more GAE's are available on the site. Only the new Ultra High Relief and the first spouse coins.
3. On the Kitco forums, (yes, I know there are a ton of nutcases there) one of the more level headed posters pointed out something interesting. The CIA factbook that measures countries "reserves" now includes gold for the first time.
I think gold is the (world) governments "ace up the sleeve" when it comes to solving the "numbers game" crisis.
The government can come out and say Gold is worth $XXXXX or whatever. It has already been done during the first Great Depression. They did it wrong that time. They paid people $20/oz and then revalued it at $35. If they had wanted to get money into the hands of the people, they would have paid them the $35 instead of $20. It would have provided more of a stimulus and would have allowed some to reduce their debt loads to manageable levels.
If they "set" the price high enough, they wouldn't even need to use all the gold to back the currency out there or the quantitative easing. The government would now be RICH and wouldn't have the need to tax people as highly for programs.
Who will buy the gold from people?
The government. And they will set the price so high that every hedge fund and every individual that has bangles and rings will sell their gold to the government. All the government has to do is give you "digits" in exchange.
Why don't they just do it now and get it over with?
Because of China. They have increased their reported reserves from 300 to 600 metric tonnes over the last year. We still have over 8000. If we revalued gold now it would disrupt the balance. China needs to get more. Give it a year or two.
Not only would it stimulate our economy, it would bring India into the game in force as most of the gold in India is held by the people. What the world needs now is consumers and it doesn't care if they are Indian or American.
Finally, with regards to what you say about seeing all kinds of "buy gold" stuff. It is the exact opposite here in the states.
Late night television is the best indicator of what you shouldn't buy. For example, never buy any waterfront land Erik Estrada is selling. It's in the boondocks. They were pumping stocks in July. They're still pumping foreclosures and even worse...buying tax liens. Just because you own the lien doesn't put you in front of the lender when the person defaults and the home is sold in foreclosure.
What am I seeing with regards to gold?
Sell your gold. Just like the ad during the superbowl. Read up on what those "gold parties" are. A complete stranger is the one walking away with your gold.
Gold is the new money.
Not much in the MSM other than a hedge fund or two investing in gold now and the big investment houses calling $1200 gold.
When the sheeple sell at $1200, it will be the investment houses buying it back from them. The sheeple will be happy as they saw a 20-30% return. The investment banks will be happy because they will see returns in the 100%+ if not 1000%+ range.
If it can happen for a fluke stock, why can't it happen for gold?
Yah, but we need more than just "hey, I'm contrarian".
Pure contrarianism (sic?) hardly has proven a historically superb investment technique, either.
Let's flesh this one out...
-evil
For jewellers, gold loses its shine
Gulf jewellers are reporting lacklustre sales, as gold prices are pushed up by recession-spooked investors seeking a solid asset class.
http://www.arabianbusiness.com/548045-for-jewellers-gold-loses-its-shine
I'm just seeing a lot of "experts" (i.e. Cramer et al) telling sheeple to get into gold, and to buy the ETF.
Uh, where were they when gold was at $500?
It feels like they're taking the lambs to slaughter. Get the shoe shine guy in, the insiders dump, mission accomplished.
But on the other hand, I always expected gold to go parabolic during a last-stage shoe-shine-guy-mania. It hasn't done that yet.
Very confusing time. This will all shake out soon, but right now, it's very unsettled I'd say.
Feels good on the sideline.
For now.
Oil will hit 50 some time in 2009.
An easy 20%.
Gold is in a speculative bubble while Oil is similiar to a deleveraging process of funds bailing out of the peak theory trade of the century. I agree. Oil will go back up. Gold will stagnate
Keith said...
"I always expected gold to go parabolic during a last-stage shoe-shine-guy-mania. It hasn't done that yet."
===================
Keith, your last word there is the key:
"YET"
One of your talents is calling events too early. Just you wait...
-Mammoth
Keith, I got out of gold a while ago for the same reason. Gold is not tied to a currency any longer so it is a pure commodity just like oil, silver, etc.
Being a commodity it changes as such and in volatile times it can plummet like oil did or sky rocket like oil did.
My take is the rise is tied to people being steered into it as a safe haven investment much like treasuries have been for many. The fall will be swift and without warning is my guess. Back to $500 could easily be reached in a matter of a month or less if long timers decide to take profits or change course. My feeling is that stocks will start to get money steered their way soon due to the cheapness of them. GE is around $8.50 which is unheard of to me. I bought some as soon as it dropped under $10.00.
I would suggest with a down economy comes little future investment in gold for jewelry or any other manufacturing reason. We will see gold plummet back down soon enough. There is simply not enough demand for gold solely as an investment because it won't hold up. The dollar and even oil dare I say are a more sure bet for posting gains as an investment in my opinion short term and long term right now.
But hey we could both be wrong Keith…
"Because of China. They have increased their reported reserves from 300 to 600 metric tonnes over the last year. We still have over 8000"
So, what does a metric tonne look like? That seems like a lot of gold to take off or put into the market and could have a big effect on prices.
If governments wanted to use their gold to pay off debts, wouldn't that increase the confidence in other markets?
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2188rank.html
Reserves of foreign exchange and gold: United States is number 23 at $70,570,000,000, estimated on 31 December 2007.
Guess who is number 22? None other than, yup you guessed it - Nigeria - at $72,040,000,000 - and that's a more recent estimate from 31 December 2008.
The big players are China, Japan, Russia, Taiwan, India, South Korea, Brazil, etc. etc. etc. - The U.S. isn't even close. Even Mexico is ahead of us, with 1/3 the population.
The Fed can't really print its own money into the reserves in a manner that would effectively increase its value (because of the hyperinflation potential), and as you probably know, our productive capacity has steadily decreased while imports have dramatically increased. So the Fed has more incentive than ever to track and take U.S. residents' gold, by whatever means available.
It will soon be considered contrary to the collective social good for a U.S. resident to hold onto his/her own gold. At that point, the government obviously would have no compuction to heed the peoples' wishes.
Conclusion: It is probably best to sell gold now while you can still get something for it, or move to a nation that doesn't need the gold so badly and would not as likely simply take it.
Just an FYI...
Gold is an excellent conductor of electricity. Oil is an excellent fuel for the production of electricity, motion, heat, etc.
I require oil (or petroleum distillates); I do not require gold. I assert that to acquire oil in the future (as I have no oil storage capabilities) that a third means of valuating wealth will be required. Despite the ever-present possibility of the "petroeuro," for US drivers and world consumers of crude, the current and near-term medium for obtaining oil is the USD.
There is considerable risk in acquiring gold for the purposes of funding future acquisitions of oil and oil products, as the gold will not likely be directly convertible to this fuel.
The flaws in this analysis should be addressed: 1) Gold can continue to be traded in a fungible market for currency and increase relative to the USD. 2) While oil is necessary for automobiles, plug-in options may soon be available which make use of non-petroleum sources of energy (e.g. coal)
http://news.goldseek.com/GoldSeek/1234386901.php
The excerpt above illustrates that the DOE stopped filling the Strategic Petroleum Reserve [SPR] as of last June [2008] – an activity that had been underway – more or less continuously – since 1999.
But the above excerpt says more than just that; it specifically states that,
“Oil from the MMS offshore leases has been exchanged for other crude oil”
The “exchange” cited in the aforementioned quote above is also known as an “OIL SWAP.”
Think derivatives.
Oil is embroiled in the unwinding of derivatives.
While oil is traded as a commodity, it is tightly entwined in currency trading.
And commodity is a derivative of commode.
Speculators are liquidating their oil positions while gold is in the beginning stages of bubble.did you guys catch the cash4gold commercial on the super bowl?That should tell you something.The sheeple are going to take it in the ass again.
No more widgets made means a lot less oil used for production. Mass layoffs mean less people driving...
Stock market and gold work opposite each other. Stocks have been in bull market since the early 1990's until recently...while gold's bull market peaked back in Dec 1980. Stock market was flat in 1960's-1970's. Where was gold?
Based on the business cycle, which investment will out-perform the other in the future?
Hint: It's not oil, and it's not the stock market....
No research necessary, it's elementary.
We are supposed to believe that economics is supposed to be logical now? As long as we don't admit there are power blocs trying to manipulate things for their own ends and maintain this delusion of MARKET FORCES then it will never make any sense.
The Economic Wargame is a continuation of the Military Wargame by other means.
.
if cramer is saying to get into gold then it must be time to get out or nearly that time.
DEC 2008
How does Wall Street get the rest of our money?
By now we are skittish and they know it. They have taken half our 401ks, but they are not done. How do they get the rest?
GE at $10 sure was tempting? Gold building a base at $1000 will bring lots of folks in.
I see unprecedented attempts to get the rest. The big players don't care if GE goes to $3, they will buy it back when they want and on their terms and start the rise. Until then anything that looks tempting is likely a trap.
Getting that last 1/2 out of a scared populace is the trickiest.
GT Charlie
Gold ETF are taxed the highest because its considered a "collectable" (27%), while all other gold stocks (miners) are taxed at the regular rate.
Possible motive?
Low oil prices prop up consumption and production while gold speculation ultimately removes wealth and savings keeping you in a voluntary slave state of existence. Bottom line; currency is power, too much of it floating around diminishes governments control.
With a powerful fiat currency the price of an asset can be changed with a keystroke.
Oil next stop $10 a barrel.
Common sense.
It's simple: Gold wears 2 different hats. In "good times", gold is a commodity. In "bad times", gold is a currency. Oil only wears one.
I like to view gold in comparison to the DOW. Here is a brief summary of DOW to gold:
At the inception of the Federal Reserve system, the Dow-to-gold ratio was approximately 3:1.
At the height of the roaring 20's, the Dow-to-gold ratio ballooned to 18:1. After the stock market collapse in 1929, in 1931 the Dow-to-gold ratio reached a bottom of 2:1. In 1963, at the next apex the Dow-to-gold ratio topped 30:1. In 1980, Dow-to-gold went 1:1.
In 1999, the ratio reached a new height—one unit of $11,000 Dow purchased 42 ounces of $260-an-ounce gold. The Dow-to-gold ratio has, with slight aberrations, remained on a steady course up or down after it moves 20% off its peak or trough. History also shows that highs have gotten higher (ranging from 18:1 in the 1920s to 42:1 in 1999) and the subsequent lows have gotten lower (2:1 in 1931 and 1:1 in 1980). The ratio has been falling steadily since 1999. One year ago, one unit of Dow purchased 18 ounces of gold; today one unit of $6800 Dow purchases 7.25 ounces of $940-an-ounce gold. The ratio is falling fast.
History would suggest that the bottom of the market will be when the Dow-to-gold ratio is 1:1 or perhaps even lower because, as indicated above, highs in the ratio have trended higher and lows in the ratio have trended lower.
Just read
http://www.financialsense.com/index.html
and
http://www.dailyreckoning.com/author/mogamboguru/
every day.
All that has been happening was explained again and again for the past several years.
This should be no surprise to anyone.
As for the disjoint relationships among dollar/gold/oil, much of it is market manipulation and the now enormous disparities between paper values and real-world values.
Oil is priced in dollars, and right now the dollar is king. . .but keep a close eye on prices. . .if oil goes past $50, then it would tell me people are bailing out of phoney dollars, and don't want to hold them any longer.
You must be even more confused right about now with oil crashing and gold holding it's own.
Actually, today is pretty clarifying.
The greatest depression in American history, straight ahead.
At least that's what the market is saying.
We'll see if they end up being right. Or terribly wrong.
A year from now, you'll be kicking yourself for not buying stocks at these going-out-of-business prices.
Or, the companies will have gone out of business.
Got popcorn?
"So, what does a metric tonne look like? That seems like a lot of gold to take off or put into the market and could have a big effect on prices."
35,000 oz troy I believe. 15 oz in a pound with gold, not 16.
35,000*1,000=$35,000,000
Our 8,000 tonnes would be $280 Billion.
Funny how we seem to hold on to something so tightly when it is worth only $280 Billion.
I think it's going much much higher.
Keith, Cramer has been telling people to buy AUY for years.
Don't get me wrong - he's a fool and foolish, but that's what he has been saying.
The market can't price in what is coming.
It would be negative.
The great unwinding shall continue with limited commercial interruptions.
Oil down 10% today... and the spread widens
Oh, yes, this is getting interesting
Oil is a real commodity. When it goes up in price, either more oil is being used, or less is being produced. Gold, on the other hand, is almost entirely paper gold. There are more shares of paper gold out there than have ever been mined in the history of the world. Soo, gold stocks are kinda like any other kind of stocks. It's just another chip in the ol' casino, like AIG or Citbank, and any number of digits can be added or subtracted from a given value of paper gold. Physical gold is REALLY, REALLY hard to come by nowadays, and I expect it to be confiscated, like in the last depression, and we will be forbidden to speculate in it. I therefore do not actually have any physical gold, although I do have some other physical metal as a long term store of value for my kids. I don't anticipate being able to use that for 20 years however.
They will not confiscate gold. Less than 1% of the U.S. population owns gold. It would not be worth their time.
Who says short oil?
You're just making that shit up.
Or citing some f'd up non-credible source.
Gold is doom to deflate.
It's massive run up is based on currency collasp caused by America becoming a Communistic country.
But despite all the money that was printed. The vaporazation amount is about the same.
This seems to be true with the entire G8, which hekos explain why all our currency has been remaining stable to each other.
One year from today when there is no inflation and 80 euros can still buy 100 dollars I suspect Gold will crash - The smart money may not wait.
I don't think there is a damn good investment out there. I suggest you learn how to handicap basketball games.
Keith,
I would not go by any ratios. I would go more with my intution.
First off, oil was a bubble and is just coming back in line with what it should be in the first place.
Second, Gold is a safe haven as we know. In times like these, gold is gold. The only issue I have is that when things settle, gold will CRASH. Yes CRASH.
Third, I can not forsee what will happen to the dollar, but in terms of FIAT currencies, it is one of the strongest in the world (they all suck). I would not be holding my breath waiting for the dollar to crash further, as IT ALREADY DID. Yes, any currency that drops from 1.26 to .76 EUR is a crash.
That is the reason why all the other bullshit currencies will continue under pressure for the unforseable future.
To sum up.
NOW YOU WANT TO HOLD GOLD AND US TREASURIES.
Dny
I keep seeing late night infomercials on buying gold...
.
I live in San Diego and the fires of 2007 and 2008 destroyed my gold...
or was it stolen...
or did I pay off a Vegas Bookie...
or did I just forget where I buried it...
or just misplace it...
or was it that terrible boating accident!
Damn!
.
Demand for gold may be up, but so is supply.
Remember stock investor clubs circa Y2K and home investor clubs circa 2005? Now we have gold parties:
http://tinyurl.com/a4wzw8
IMO the top is in for gold.
Locally, people are panicking into gold bullion coins. They are not buying the "collector coins" with their hefty premiums. They are just buying bullion.
No one cares about oil. So the price of oil is going down, and the price of gold is (mostly) holding steady. That is the reason your gold/oil ratio is widening.
Kenduffelsniffenspotzen
"Demand for gold may be up, but so is supply.
Remember stock investor clubs circa Y2K and home investor clubs circa 2005? Now we have gold parties:
http://tinyurl.com/a4wzw8
IMO the top is in for gold."
You my friend need to work on your comprehension skills.
Circa Y2K, the investor clubs were prodding you to BUY stocks.
Circa 2005, investor clubs prodded you to BUY houses.
Gold parties are trying to get you to SELL your gold. NOT buy.
Think about it.
http://www.prisonplanet.com/soros-confirms-lindsey-william%E2%80%99s-assertion-oil-is-a-weapon.html
in 1931 the Dow-to-gold ratio reached a bottom of 2:1.
=============
So look for Dow 2000 Gold 1000
or
Dow 4000 Gold 2000
??
Interesting.
Second, Gold is a safe haven as we know. In times like these, gold is gold. The only issue I have is that when things settle, gold will CRASH. Yes CRASH.
==========
OH I HOPE SO! I will buy it up right away.
GIMME
GIMME
GIMME
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