If you can’t earn anything in a savings account or T-bill, you might as well have gold, right?

The Nov NYMEX crude oil futures contract rolled to the Dec contract, which closed at $66.75. Overnight it rose to $68.50 on talk from the Iranaians of a 2 million barrel per day cut at the Friday OPEC meeting, but the market understands demand is falling… and the price fell back to $67.17 at 12:31 pm GMT. As Bloomberg notes, prices have more than halved since the record high $147.27 on July 11. The US Energy Dept report yesterday confirmed that demand elasticity is better than anyone expected, with fuel demand down 8.5% y/y. Demand for gasoline fell 4.3% y/y.

See the gold chart. We think it was necessary to erase the upsloping channel and restore the old downchannel from the peak in March (over $1000). As with oil, we have the chicken-and-egg issue of US dollar exchange rate up, commodity price down and vice versa. As we all know to our rue, gold is not really an inflation hedge-it keeps up but does not yield anything over inflation over long periods of time. This time, it’s obvious that after the recession starts bottoming (sometime next year, presumably), inflation is likely-and then gold will take off again. But you have to wonder where the gold bugs are today-why are they not buying ahead of massive uncertainty? If you can’t earn anything in a savings account or T-bill, you might as well have gold, right?

Buy for Now

Barbara Rockefeller
Forex Trading Reports

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