LIVE Gold Prices $  | E-Mail Subscriptions | Update GoldSeek | GoldSeek Radio 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Fortuna Silver: An Incredible Value Play
By: Dave Kranzler, Mining Stock Journal

COT Gold, Silver and US Dollar Index Report - December 13, 2019
By: GoldSeek.com

Beware Gold-Stock Downside
By: Adam Hamilton, CPA, Zeal Research

Japanification, Deflation and Backwardation in Gold & Silver and Base Metals
By: Darryl Robert Schoon

Precious Metals Update Video: Gold has found a home here
By: Ira Epstein

Asian Metals Market Update: Dec-13-2019
By: Chintan Karnani, Insignia Consultants

As The Financial System Melts Down Gold And Silver Will Soar
By: Dave Kranzler

Blowing Bubbles for Fun and Profit
By: Gary Christenson, The Deviant Investor

A Missing Motive
By: Ted Butler

When Will GDX Break-out?
By: Jordan Roy-Byrne CMT, MFTA

 
Search

GoldSeek Web

 
Will Gold Catch-Up With Crude?



-- Posted Tuesday, 11 March 2008 | Digg This ArticleDigg It! | Source: GoldSeek.com

by Michael J. Kosares

Oil and gold have had a long association in the minds and hearts of investors. Where one goes, the other seems to follow. So when OPEC made its announcement last week to maintain production at current levels, gold market participants might have taken it as a suggestion that gold would be basing at just under $1000 instead of forming a top. When comparing oil and gold on the inflation-adjusted charts, however, there appears to be more to the story than the possibility that we have reached an interim bottom.

As you can see, the oil price is now approaching its all-time high adjusted for inflation at near $105. Simultaneously gold clearly remains at less than half its inflation-adjusted high of over $2300 per ounce. What's more, looking back to the stagflationary 1970s, an era many economists equate with our own, gold rose at roughly twice the rate of oil. Now gold is rising at roughly half the rate of oil. In other words, if historical balance is to be retrieved in the months and years ahead, gold will not only have to rise with oil, it will have to rise faster than oil.

One explanation for the current disequilibrium between gold and oil is that OPEC has become a more effective cartel, while gold is just now breaking the bonds of decades of price management (intended or not) at the hands of the mining companies, bullion banks and official sector. If both are dancing to the same tune of currency inflation, as they did in the 1970s, then something may be about to break.

Such imbalances are rarely overlooked by professional traders and that may be at the heart of why interest in gold has picked up significantly with institutional investors, pension fund managers, et al in recent weeks. In addition, with the financial system under assault and real estate on the ropes, the commodity complex in general looks primed to become the repository for hot global capital looking for a place to park.

Along these lines, it was not surprising to read a New York Times report that Calpers, the largest pension fund in the United States, is about to increase its commodities commitment sixteen times to $7.2 billion through 2010. Nor did I take lightly the recent comments by Quantum Funds' Jimmy Rogers that he expected gold to continue its rise -- and that $3500 per ounce is not out of the question.

So, will gold play catch-up with oil in inflation-adjusted terms? Will we see gold at $2300 per ounce? My guess is that we will. Clearly OPEC is not in the mood to carry the burden of competitive currency devaluations further. The historic relationship between oil and gold is likely to reassert itself, and it is unlikely that it will be because crude oil took a fall. Gold, when viewed in inflation-adjusted terms, looks like quite the bargain.

(Charts courtesy of Thechartstore.com)

inflation-adjusted oil price
 
inflation-adjusted gold price

Michael Kosares has nearly 35 years experience in the gold business and is the founder/owner of USAGOLD-Centennial Precious Metals. He is the author of The ABCs of Gold Investing: How to Protect and Build Your Wealth With Gold as well as numerous magazine and internet articles. He is frequently interviewed in the financial press and is well-known for his on-going commentary on the gold market and its economic, political and financial underpinnings.

Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. Centennial Precious Metals, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD - Centennial Precious Metals does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.


-- Posted Tuesday, 11 March 2008 | Digg This Article | Source: GoldSeek.com




 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2019



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer


Map

The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, Gold Seek LLC, is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.