Deepcaster’s regular readers know that Deepcaster is bullish for the long-term on both Crude Oil and Gold.  But is bullishness on both Gold and Crude justifiable in the short term?

Regarding Crude Oil, among the many reasons for Deepcaster’s long-term bullishness is that the world is at about “peak oil” - - that is, the peak of possible production.  Whether “peak oil” is actually this year, or in the next year or two or three, is rather irrelevant.  The evidence, according to Matt Simmons, Boone Pickens, and others in a position to know, is that we are at “peak oil.”  One salient fact is that the rate of consumption considerably exceeds the rate of discovery, and has for some time.

Another is that Crude Oil demand worldwide is increasing between 1% and 2% a year.  Thus, higher prices are likely to follow in the long-term. 

Similarly, for Gold, there are many reasons that long-term prospects for price appreciation are very bright.  Among them are that the U.S. Dollar, the world’s Reserve Currency, continues to be moved on a downtrend in purchasing power terms, and in terms of other major currencies.

The U.S. Federal Reserve continues to print this Fiat Currency with abandon.  Various credible estimates put annual M3 increases at 12 to 13%.  (Ominously, the privately owned and controlled United States Federal Reserve Bank no long publishes M3 figures.)  Such M3 increases and U.S. Dollar purchasing power deterioration should be very bullish for Gold and Silver, the monetary metals, in the long-term.

But what are the prospects in the short term? 

Regarding Crude, for the short run there is a very plentiful above-ground supply of Crude just now.

Moreover, high prices for Real Assets in general, and Strategic Commodities like Crude Oil in particular are a threat to the legitimacy of The Cartel’s* Treasury Securities and Fiat Currencies for reasons we have explained in earlier Letters and Alerts.

*[We encourage those who doubt the existence of Intervention by a Cartel of Central Bankers to read Deepcaster’s October, 2006 summary overview of the Manipulation entitled “Juiced Numbers IV:  How the Government Gets the Statistics It ‘Wants,’ Markets Get Manipulated, Citizens Get Deluded, and Worse” at www.deepcaster.com.  Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org for information on precious metals price manipulation.  Virtually all of the evidence for intervention and manipulation has been gleaned from publicly available records.]

Thus, we must balance the bearish factors - - that the current above-ground supply of Crude is ample, and high Strategic Commodities prices are not in the interest of the Cartel - - with the bullish factors - - that current demand is still increasing, and that actual, imagined, staged, or potential geopolitical threats work to push crude prices higher.

To resolve this conundrum we must consider not only the fundamentals and technicals, but also the Interventionals.  Deepcaster has made such an evaluation and has developed a Forecast and an Oil Equities recommendation designed to profit from that Forecast in its August Letter posted at www.deepcaster.com.

Similarly, regarding Gold, there are factors justifying both bearishness and bullishness in the short term.  Ordinarily Gold, Silver and Precious Metals would be the “Go To” Assets in a time when the World’s Reserve Currency is weakening.  Yet in spite of the fact that all the Fundamentals and Technicals are quite strong and have been for some time, Gold and Silver prices are clearly subject to Takedowns by The Cartel of Central Bankers*.

Moreover, there is increasing evidence of a linkage (quite possibly Cartel-induced) among the Gold, Crude and the Equities Markets.

Regarding the Equities Markets recent significant Takedown, Deepcaster accurately forecast that Takedown a few days before it occurred, advising readers to “cash up” and lighten up in equities.  Indeed, Deepcaster forecasts another significant Equities Markets move to come soon, after a brief bounce.

So it is important to consider that it is not in The Cartel’s interest (when the Equities Markets are being taken down) for there to be appreciating (in price) alternatives (like the Monetary Metals) to “compete” with its Fiat Currency and Treasury Securities Regime.

This is understandable (if not either ethical or in the best interest of nations) because the monetary metals, Gold and Silver, as inherent stores and measures of value, are a significant threat to the legitimacy of The Cartel’s Fiat Currencies and Treasury Securities Regime.

But does The Cartel still have the clout to cause Gold and Silver to be taken down simultaneously with the Equities Markets?  And will Crude be, can it be, moved in tandem? 

Deepcaster has responded to this question in its Forecast for impending moves in the Equities Markets, Gold, and Crude which is contained in its August Letter posted at www.deepcaster.com.

Suffice it to say that the next very few weeks should bring major moves in the Equities, Gold and Crude Oil Markets.  The evidence for linkage among these three sectors continues to accumulate.  Investing on the basis of this evidence is likely to be quite profitable.

The Subprime Meltdown lit the volatility fire, as it were, and the Markets are boiling.

Deepcaster

August 3, 2007

DEEPCASTER LLC

www.deepcaster.com

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-- Posted Friday, 3 August 2007 | Digg This Article