As I write this at 9:15 a.m. EST on Monday, August 3 the WTI Crude Future is up $1.61 to $71.06, and the Gold Future is up $7.40 to $963.20.  At the same time the Silver Future is up $0.51 to $14.51.  So what is this telling us at a time when many politicians and central bankers are saying the recession in the U.S. is bottoming and will be in recovery by the end of 2009.  Yesterday Alan Greenspan was interviewed on National Television and actually talked about it being too early to raise interest rates as a way to curtail inflation – which for many reasons seems both premature and absurd to me.  All that said, U.S. stock futures are advancing, and all seems right with the world.  As I see it, a rise in Oil futures makes sense if traders believe U.S. economic recovery is just around the corner.  Silver, which I consider to be largely an industrial metal and very complex and hard to predict given its myriad demand/supply relationships, likewise ought to respond positively in a time of economic recovery – although those who see Silver as a monetary metal likely more simplistically link it with Gold’s behavior.  Gold to me is more simple.  I think it is about purchasing power, not price.  Hence I see the increased price of gold as an indicator that the world is anticipating erosion in the price of the U.S. $ against other currencies, and I suspect those purchasing and trading gold at root are a different crowd from those participating in the oil market – and that the ‘gold crowd’ is not so sure of economic recovery and are concerned about prospective inflation, or worse, prospective deflation.  One thing I think for sure – I think it oxymoronic that the U.S. stock indexes rise (the Dow Future is up 74 at 9:15 a.m.) and the gold price rises in concert with that.  While anything can happen going forward, at the present time I am on the end of the teeter-totter that has a box of physical gold sitting on it, not the one that has a barrel of oil sitting on it, and am certainly not on the teeter-totter that has a diversified basket of equities sitting on one or the other end of it.

Click here for Research on Gold Stocks.

See Blog Legal Disclaimer

Possibly Related Posts:

• Consequence of Iranian Oil Embargo?
• 2012 – More Difficult Than 2011?
• Iran v. United States!
• Iran – Playing Chicken?
• Banks on 2012 Gold Price?

Trackback URI | Comments RSS