megiddo666

Unlearning the Psychology of Markets

After carefully following global agriculture and geo-politics for the last few years, I would suggest that gold may be driven up as a haven against instability created by massive change in global economic systems.

For example, global grain shortfalls are a significant factor in government planning and action across Asia and Africa, where governments are attempting to minimize social instability due to real or perceived shortages and agriculturally driven inflation.

Hard asset acquisition in relation to this instability is high in Asia. An example is Pakistan's current situation, not just its political instability the West reads about, but its current economic disruption due to grain shortages, etc, that is a driver for gold purchase, since gold is seen keeping up with the inflationary spiral for core goods, such as fertilizer.

It seems that local economic factors regarding change are driving gold purchases across larger geographic areas, not just in response to inflation, but local market disruptions, against which gold is an economic hedge as much as a status symbol.

Recession Fears Will Bring Oil Down to $70

Appreciated your thoughts, however there are a few factors that may change the assumptions.

Chinese private vehicle ownership in 2007 was up 10.92 percent over 2006. Trucks ownership increased 7.5%. China added 15 million new drivers in 2007. China will build over 2000 miles of new interstate highways in 2008, not including new provincial highways and will still not have completed its national highway system. Chinese new car sales are expected to be increase around 20% yoy in 2008.

The Chinese are already experiencing long lines at gas stations, and trucks are rationed diesel purchases in many cities and provinces. China is still expanding its national petroleum reserves.

This demand problem is not one that will be solved soon. This does not consider increased oil use elsewhere, outside the US and Europe.

On the supply side, OPEC is not increasing production and has stated high oil prices will continue through 1Q 08.

Given the above, I would expect gas prices to rise to meet oil costs as much as oil prices to decline.