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-- Posted Monday, 6 July 2009 | Digg This Article | | Source: GoldSeek.com
If you hold that the bear stock market rally is over, or almost over then shorting oil and going long in the US dollar is a logical step. Oil and the US dollar move in lock-step: weak dollar, strong oil price; strong dollar, weak oil price. Just look at what happened last year: a weakening dollar drove the oil price to a $147 peak last July; then in the financial crash of the autumn everything was sold for dollars, pushing up the greenback, and oil prices dropped to $32 by December. Oil price high This year we have seen dollar weakness again and the oil price went up to a high of $73 last week. Is this about to unravel now, with renewed stock market weakness rallying the dollar and knocking the stuffing out of oil prices? That much could be fairly obvious after the big stock market sell off at the end of next week, and the fall in the oil price to $67. The big question is whether this market correction becomes a new directional trend. Readers of this financial website will know what to expect next as an argument. We have just gone through a massive bear market rally in stocks, and yet economic fundamentals are arguably still worsening, if not actually going down as fast as earlier this year. Therefore, the stock market must correct to a less optimistic outlook. Or will it? The pattern of previous big bear market rallies is for a modest correction to be followed by a brief but spectacular blow-off before a real downturn. We do not appear to have seen that final blow-off yet. New trend? On the other hand, if market participants can come back down-to-earth for a moment and consider where this is all heading then they might get a very useful pointer to the outlook for the US dollar and oil. For if the markets are being set up for something resembling a second installment of last autumn’s drama then that will mean a sharp fall in the oil price – perhaps below $25 – and a rally in the US dollar. That might also be bad for the gold price but with inflation fears growing it might be a beneficiary of the flight to safe haven assets, and perform even better than last autumn as a preserver of wealth. So go long dollar, short oil and hold gold?
-- Posted Monday, 6 July 2009 | Digg This Article | Source: GoldSeek.com
Previous Articles by Peter Cooper
About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in
1999 to complete his first book, a history of the Bovis construction group.
Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.
 Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.
He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.
Order my book online from this link
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Long Dollar, Short Oil, Hold Gold?
