No Moss

Merry New Year: Cheaper Oil, Silver Options

Well, I like the article whose link I am providing ( by Daniel Dicker):

biz.yahoo.com/ts/08120...

Basically, Daniel mentions the huge contango that exists now (current price of $43 vs December 2009 futures of $57), plus credit issues that constrain the investment in futures and lead to deflation. The strong dollar is a major factor in keeping prices down. We've got winter fuel oil and cheap gas prices in the US to fuel demand.

What we haven't had is any geopolitical event of note recently.

Demand for oil will continue to drop until it doesn't, and then the turnaround could be very quick. China's demand for oil edged up in October, according to Reuters and this Seeking Alpha article:

seekingalpha.com/artic...

Short oil? Wow, that would be incredibly dumb at this point, given the low possibility of reward and the virtually unlimited possibility of punishment.

Why Gold is Likely to Keep Moving Higher

I'm sorry, but you know it's a market top for gold by the number of articles touting gold to go to $1500-2000-higher. Gold can come down based on supply when institutions start selling, like the IMF recently has. There is a lot of gold gathering dust, and higher prices bring out sellers. The last spike in gold prices faded quickly and didn't recover for decades. I'd be surprised if the current spike didn't end in a similar fashion.

We have a perfect storm of financial panic, a falling dollar, falling home prices, falling stock prices, and quickly rising commodity prices, especially energy-related commodities, which have the most pervasive inflationary effect on economies.

Will gold still be king when it's safe to come out and play? Probably not.

Next Stop: $2,000 Gold

Gee, I'm sorry, but gold bugs are all the same. Gold does well when there's financial stress. People run to gold when they sniff panic in the air. It's like a herd rampaging.

Then the dust settles. Calm returns. When it does, gold doesn't look so good anymore. It doesn't return anything. It doesn't move, or if it does it moves down.

At the end of the stampede, there are the dedicated gold bugs who just can't accept that gold has served its purpose.

My prediction? Gold won't hold $800 in the next month. There is virtually no upside for gold short of war. I have no idea where gold will settle in the long run, but I'm pretty sure that by the time T-bills creep back over 2% (a sign of a return to financial normalcy) gold will have lost its luster yet again.