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Oil Dances Some More Helping Gold To Move Up


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Mar 25, 2010
Oil Dances Some More Helping Gold To Move Up

Wednesday February 24, 2016 17:58

One month ago, crude oil closed at 33.35. Today it settled at $32.15. In between those marks, the swing above and below $30 per barrel has been about 10% on either side of the line. It hasn’t budged out of the range. Normally, 10% is a big number. Given the painfully low price of oil, the 10% has been devalued, if not in reality, then psychologically.

Yet oil is practically holding equities hostage to its gyrations within that relatively narrow band. (We are not, after all, talking about a twenty or thirty percent swing.) We have a theory as to what is causing stocks to take such a meager signal and turn it into overly strong action.

There is lack of sustained, positive news of other kinds. Sometimes housing, (existing or new – it doesn’t make much matter), is up; sometimes it’s down. CPI might cause the Fed do this with rates, or on the other hand, do something quite opposite.

Such and such corporation met earnings forecasts but missed revenue. Or a company might have missed earnings in spite of meeting revenue.

You can pick any indicator other than oil and they don’t seem to communicate anything clearly. Because crude is such an important world commodity and billions can be won or lost in the arena, it perhaps shouldn’t come as a surprise oil is pushing equities around like a baby in a carriage.

Oil has become the dictator, the strongman, the caudillo that everyone hails and fears.

On the positive side for Gold Forecast traders, this has meant a solid jumping off place for gold. Today the yellow precious metal traded above 1250 for a spell but has since fallen back, though it closed in afternoon trading above 1230. That is up $7.50 at 4PM in New York.

It fell back because oil held its gains and buoyed U.S. equities. All three major U.S. indices are up with NASDAQ strongest at +0.85%. Apple and Facebook led the NASDAQ higher.

It should be noted that another trend that is hurting equities globally is concern over the banking/financial sector. Uncertainty there tends to communicate fear in general, or at least a sense of not knowing how to go about short and mid-term planning.

Much of that is coming from negative rates in Europe and Japan. Of course, given the global nature of finance now, the fact that the U.S. raised rates in December means little, as American institutions have plenty of exposure in other regions and suffer the effects of negative rates.

Other traditional safe-haven plays did well today, but one could not call the yen’s or the U.S. 10-year bond performance stellar. The Japanese currency is up against the U.S. dollar barely over 0.10%. The British pound sterling is taking a beating over its dithering because of the so-called Brexit, the political struggle over British exit from the EU, a stupid idea if we ever heard one.

The U.S. 10-year yield is unchanged.

So that leaves us with gold, which, as we have been saying for a while, is functioning as much more than a safe haven and more as a way to make some real money. There are many reasons for this.

As most gold traders know, gold has been seriously oversold for a number of years. There are also many investors as well who are recalibrating their portfolios to embrace more and different investments. Gold is the most time-honored of those. There are others, however, like very small, very high-end real estate trusts. (Think $25 million apartments in London, New York, Tokyo and Shanghai.) On the more ominous side, there is the purchase and sequestration of water rights in dry-and-getting-dryer regions.

For those who would like a deeper analysis with detailed buy and sell recommendations, I invite you to try our daily video newsletter. Simply use the link at the bottom of this report to sign up for a free trial.

Wishing you, as always, good trading,

Gary Wagner

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.