• Stock Investing Blog
• Trading Options
• Forex Trading
• Options Trading
• Stock Market Basics
• Fund Information
• Investor Definitions
• Stock Market Forums

• Stephen Cooper
• Easyonlinepaydayloan

Home >> Stock Forums >> Oil and Gold still gaining

Oil and Gold still gaining

AlfredSokol said: "Oil and Gold are still in fashion. They are [url=http://www.sharecast.com/cgi-bin/sharecast/story.cgi?story_id=1579028]gaining[/url] in the face of uncertainty. [quote] Dollar weakness, rising energy prices and safe-haven demand kept gold well above $700 Monday, continuing last week’s rally. Gold for delivery in December gained $2.50 to $712.20 an ounce in New York, although the yellow metal had been higher earlier on. Prices are closing in on the 26-year high at $730 an ounce seen in May last year, with experts predicting a move through resistance at $735 by the end of 2007. Buyers remained positive ahead of next week’s meeting of the US Federal Reserve at which interest rates are expected to move lower. A weaker dollar is good for gold. [/quote] What will happen if the Fed holds or raises?"

Pb3190 said: "I think if the fed holds rates, gold and oil will slow in their gains. They will still be moving up, but not as much as they have the last few weeks."

newinvestor123 said: "In the long run, oil, gold, and all commodities will continue to rise, due to the breathtaking pace modern governments are creating new money to fund global growth, and, in the case of some commodities, such as oil, simple supply and demand. I also am a medium term dollar bear, so I believe that money will continue to flow out of the dollar and into commodities, specifically gold, as the dollar continues to decline. I see no fundamental reason for a dollar bottom right now, and when the FED cuts rates, there is a pretty good chance that the dollar will be driven right through key support to it's lowest level in a loooooong time. Medium term, gold will rise because the FED will be forced to cut rates - At least a full point within the next year, I predict - to soften housing's impact on the economy. Short term, if the FED does not cut rates next week, gold may level out and stagnate until more scary news about the economy's decline rolls in (which is NOT going to take very long), at which point gold will resume it's upward trajectory. I have been bearish on the US economy and bullish on gold for a while now, and I have been adding to my gold positions significantly since people finally figured out that the subprime problem is nowhere near 'contained.' I think the FED will accept the lesser of two evils - They will sacrifice the dollar to (attempt) to save the economy. If they do not, the US economy's recession will be a massive monkey wrench in the gears of the global growth party, and central bankers do not want that. The US's export side of the house needs a good jump-start anyways, which is what a weak dollar does. Imports will be more expensive, US exporters will make more money, domestic production will increase, and when we find ourselves closer to a zero export/import imbalance, the dollar's fall may stop. Until then, it's screwed, and in dollar terms, all commodities will continue to appreciate. Gold is the traditional store of value, and it's rise will be the most spectacular. Look at gold stocks - They have been beaten down - And even with their recent 15% jump, most of them are nowhere near their highs. I might also add that most miners can dig gold out of the ground at less than $350. The risk/reward ratio there is compelling, in my opinion."

Pb3190 said: "How much of an impact would the failing dollar have on the markets? So far, the markets have held up in the face of a declining dollar. I'm talking about the last 4-6 months, not the last few days/weeks. Can the dollar decline to all time historical lows, without bringing the market down with it?"

newinvestor123 said: "The dollar is already at historical lows: [IMG]http://www.page88.co.za/cr/images/dx-twi-long-term.JPG[/IMG] A weak dollar, provided the decline is slow and steady, can be a good thing in that it can jump-start domestic manufacturing and production - Thereby narrowing the trade imbalance that Ben spoke of in Berlin earlier today. However, the danger lies in more expensive commodities - specifically those which are mainly imported (oil) - Which, obviously, is not good for the economy. One of the characteristics of a dollar-decline-is-good-in-the-long-run thesis is that it takes a while for the positives - Increased domestic production and exports - to kick in, while the negatives are felt immediately in the form of higher prices on just about everything we buy (since we import just about everything we buy), so if the decline is slow and steady, that gives companies time to build their international exposure, which at least partially offsets a rise in the cost of our imports. As you can see, the dollar's fall during the last 5 years has been slow and steady, so it was not as much of a concern than, say, had the dollar dumped 10% in one day. One of the main reasons the market has been rising in the face of a dollar decline, I belive, is almost totally due to easy credit. When the FED loans money to the banks at low rates who, in turn, loan money to the consumers at low rates, this creates a situation where the economy is flush with liquidity, and that liquidity must go somewhere. In the last 5-7 years, it went into the housing market, and in the last 3, the stock market. They only way the FED can stop the credit contraction (hangover after the party) is to throw more money at the problem (the drink in the morning) which, when growth does not keep pace, creates more inflation, and drives the dollar down. However, US companies are eager to get a piece of the international pie, and have already begun using the dollar's decline in their favor to expand their businesses overseas. I don't know exactly how much our exports totaled vs our imports last year, but I'm pretty sure our exports would not be enough to buoy our economy if virtually everything we bought within the next year increased in price by 10-20% (assuming the dollar fell that far, that fast). So, if the dollar DID fall by that much, there would probably be at least a few years of turmoil until exports caught up. I think. Meanwhile, gold miners, silver miners, and companies with significant international exposure would be rolling in the dough. Then again, I may be missing something - I am no economist. I'm just a guy... with a computer..."

AlfredSokol said: "Oil briefly hit $80 per gallon today."

newinvestor123 said: "And gold's rise stopped dead in it's tracks."

lil dickie said: "Oil is the new Gold."

newinvestor123 said: "Noooooooooooooooo!"

zaurm said: "Gold will be at its highs toward the New Year...but until then, there is a decline =))"

Pb3190 said: "If the Fed lowers rates next week, anyone in gold will have a good day."

lil dickie said: "How does the Fed rate affect Gold?"

newinvestor123 said: "A rate cut basically equates to the FED throwing money at the problem, which creates inflation, which lowers the dollar's value relative to all other currencies and assets. Since traders are so eager to price such an action in, instead of it happening over time, it happens immediately. Gold is seen as a hedge against inflation because it can be traded for any other currency or asset anywhere in the world at any time, and because it's value relative to other currencies and assets does not rely on the whims of a group of people who can create more out of thin air. Basically, if people see inflation, they buy gold and other hard assets to preserve their money's value. FED rates go down, dollar goes down, commodities go up. Theoretically, none are worth any more than any other at any given time, it's just the value of the measuring currency (the dollar) which changes. And yes, if the FED does cut rates, I will probably have a good day. I don't think a 1/4 point cut is fully priced into gold yet. On the other hand, if we get no cut, I could have a very bad day..."

lil dickie said: "Hmm. Interesting. I guess we will see what happens then!"

Harry said: "[QUOTE=newinvestor123]A rate cut basically equates to the FED throwing money at the problem, which creates inflation, which lowers the dollar's value relative to all other currencies and assets. Since traders are so eager to price such an action in, instead of it happening over time, it happens immediately. Gold is seen as a hedge against inflation because it can be traded for any other currency or asset anywhere in the world at any time, and because it's value relative to other currencies and assets does not rely on the whims of a group of people who can create more out of thin air. Basically, if people see inflation, they buy gold and other hard assets to preserve their money's value. FED rates go down, dollar goes down, commodities go up. Theoretically, none are worth any more than any other at any given time, it's just the value of the measuring currency (the dollar) which changes. And yes, if the FED does cut rates, I will probably have a good day. I don't think a 1/4 point cut is fully priced into gold yet. On the other hand, if we get no cut, I could have a very bad day...[/QUOTE] I partially agree but I don't generally don't agree. You align events too parallel. Throwing money the the problem acknowledges there is a problem. Aside from a short market rally when the FED increases rates, the trend from a weak economy will crawl on. Inflation will continue to spiral down. I think the true benefit for gold is still way down the pike. The cost of lending is pricey now. Once THAT changes it needs time to root and grow again. But I do have problems calculating in the rest of the world on gold's behavior. I own AUY merely to be diversified. With much volatility is could basically remain flat."

newinvestor123 said: "Harry, I don't know where you get the idea that when the economy slows down, inflation automatically follows suit. That's wrong. If whoever is controlling the money supply continues to create money at the same rate while GDP declines, the result is HIGHER inflation. Money supply growth - GDP growth = inflation. I think the FED is taking a big gamble by attempting to save the economy via rate cuts, because if it doesn't work and housing pulls our economy into a negative growth rate, things could get pretty bad. If they had simply allowed the housing bubble to burst on it's own while "monitoring" inflation, we would have likely had a minor recession. Instead, the FED has gambled that by throwing money at the problem, they can alleviate housing just enough to keep GDP in positive territory while housing sorts itself out - But if that does not work, higher inflation from rate cuts combined with a possible recession = (cue scary music) Stagflation! Scary times + increasing money supply growth + slowing economy + possible war with Iran + most miners can extract gold for ~$350 or less + oil's continued rise = Bullishness for gold stocks! An interesting factoid is that the last time the US experienced stagflation, during the 70's, gold hit an all time high of $850. Adjusted for inflation (using the government's 'official' statistics.. hehe), that's about $2600 in today's terms. Will gold hit $2600? Eventually, yes - But when that will happen is anyone's guess. What I DO know is that the FED is creating money faster and faster every year, and they are brushing off the rise in the price of EVERYTHING as simple supply and demand. I call BS on that. Excess liquidity created by the world's central banks has to go somewhere, and it is... going... everywhere. I think the underlying reason that the overall increase of the price of everything, from food to housing to energy, is mostly due to excess money supply creation. You didn't think the US was the only country with a housing bubble, did you? Oh no - [URL="http://www.economist.com/printedition/displayStory.cfm?Story_ID=4079027"]It's a worldwide phenomenon. [/URL] Why? [URL="http://en.wikipedia.org/wiki/Money_supply#Recent_Money_Supply_changes"]Excess global money creation[/URL]. That's what I think, I think it will continue, and that's why I believe commodities are the best bet right now. China and India will continue growing for a while, providing the demand, and commodities are natural hedges against inflation. Since I believe inflation is the key driver for commodity prices (and nearly everything else), and gold is the traditional commodity to hedge against inflation, I think gold will gain the most over the next... while - And at the very least, the downside is limited."

newinvestor123 said: "[url]http://www.seekingalpha.com/article/47762-the-bernanke-fed-could-ignite-hyper-inflation[/url]"

AlfredSokol said: "Bernanke should not have cut rates IMHO. But the Fed has always cow-towed to the consumer. And nobody thinks consumers will buy anything without easy credit, which may be true. But frankly I don't like the current move at all."

newinvestor123 said: "[url]http://bigpicture.typepad.com/comments/2007/09/fear-of-a-dolla.html#comments[/url] The comments are always good at this website - Some are as good as the article itself."

Pb3190 said: "Some interesting material in your link new. Good article like you said, and some of the comments are worth reading as well. That seems to be rare with financial websites..."

Rbreb13 said: "[URL="http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BAB7D319C%2D6E3B%2D47BA%2D9368%2DF4E70F57774D%7D"]Gold futures' next stop: $800, then $2,000 or bust? [/URL] [QUOTE]You could say prices have a long way to go, given that the all-time high for front-month gold futures was $875, which hasn't been seen on Nymex since Jan. 21, 1980. And that was only a nominal high. "I do not believe today's prices are lofty," said Scott Wright, an analyst at financial-services company Zeal LLC. "Gold would have to exceed $2,200 an ounce in today's dollars to match the all-time real high achieved in 1980." [/QUOTE]"

JAP said: "Technically, gold and oil stocks are overbought and due for a pullback... some more than others."

lil dickie said: "It is amazing to me that the idea of conservation of oil isnt catching on with too many people. Its a quick way to save money these days."

Pb3190 said: "Is mooching off of friends for car rides considered conservation of oil? :laugh:"

AlfredSokol said: "[QUOTE=Pb3190]Is mooching off of friends for car rides considered conservation of oil? :laugh:[/QUOTE] In its' most classic form. :th_dblthumb2:"

newinvestor123 said: "Gold today hit it's highest price since 1980. [url]http://www.forbes.com/markets/feeds/afx/2007/09/28/afx4166918.html[/url]"

JAP said: "[quote=newinvestor123]Gold today hit it's highest price since 1980. [URL="http://www.forbes.com/markets/feeds/afx/2007/09/28/afx4166918.html"]http://www.forbes.com/markets/feeds/afx/2007/09/28/afx4166918.html[/URL][/quote] So if you bought gold in 1980, it took 27 years to break even. :whacky011:"

lil dickie said: "[QUOTE=JAP]So if you bought gold in 1980, it took 27 years to break even. :whacky011:[/QUOTE] Sounds about right. :th_dblthumb2:"

newinvestor123 said: "Actually, if you bought physical gold in 1980, you still wouldn't be anywhere near breaking even due to inflation."

lil dickie said: "True enough. I know some guy who has been hanging on to his krugerands the whole time."

darsh999 said: "I think its all depend upon fed wethere if he wants to make continue the increase in the rate or decrease the rate . The price is also used to flctuate every single mintue, so can`t say anything about its stability !:whacky011:"