Owen

5 Reasons Why the $700B Bailout Could Translate to $250 Oil

How can a 3% rise in the US dollar explain a 30% drop in crude oil prices? This isn't math; it's myth.

Update: Crude Oil, Priced in Gold

swrichmond,

What exactly are you implying when you say "I suspect that's no accident"? I have no positions in gold or related instruments. I will neither gain nor lose if gold prices go up or down. I have several posts on this site related to the conspiracy theory about physical versus paper gold. I am not trying to promote anything except common sense and critical data analysis.

What you call "increasing investment demand" for gold simply means private investors are buying gold from central banks and other inventories. Gold is moving from one vault to another; none of it is consumed. Sure, it's no different than demand for a company's stock, but it is different from demand for a consumed, dwindling resource like oil.

If you think gold will hit $2,500 an ounce by 2010, good for you. I like to quote Warren Buffett who said about gold:
'It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.'



On Sep 30 03:40 PM swrichmond wrote:

> Owen,
>
> You couldn't be more wrong about gold, and upon reading some of your
> other posts I suspect that's no accident.
>
> Credit Suisse noted in November '07:
> www.mineweb.com/minewe...
>
>
> "In a recent "Gold Note," Credit Suisse Research Analyst David Davis
> said, "Our studies indicate that the dynamics surrounding the gold
> supply and demand has begun to change inexorably towards a diminishing
> supply of gold and increasing investment demand, which will ultimately
> impact the gold price."

Update: Crude Oil, Priced in Gold

Nice to see a contributor who understands fundamental analysis. Good job, Babak! I also like the fact that you chose a logarithmic scale for price. Many analysts forget the fact that prices are always lognormal.

One point to remember is that oil is a consumed commodity in a tight supply, while gold deposits are vastly larger than anyone can ever use, hardly any of it is consumed, governments are sitting on huge piles of it in vaults, and more of it is being mined each day. In time, the ratio between the two must change, and long term it can only move up--oil will cost more in gold terms.

Oil's Creeping Backwardation

At 2:30pm today (EDT) the October/January spread jumped from $0.50 to $1.50. This is a major sea change.