Energy report: Gold is driving the bus

Buying is golden. Black gold is rising, being driven by the more traditional yellow gold as it surges above $1,000 an ounce for the first time since February, 2009. The mellow yellow isn't so mellow as its move is raising inflationary caution flags and is dragging up oil and other commodities as well.

As much as oil likes to act as a strategic investment, at times gold seems to be the shining commodity of the moment. Strong seasonal gold demand in India, as well as a weak dollar, has gold soaring helped along by China and some big mining plays. Dow Jones reports that Goldman Sachs is pumping up China metal demand expectations by saying that Chinese metals demand will remain "robust in 2009” and 2010. The reason they say is China’s government's pro-growth policy and an expanding supply of loan capital.

The move in metals has oil reluctantly rallying higher. Normally crude oil would be worrying about the upcoming OPEC meeting as opposed to worrying about the gold market. Yet the yellow metal surge is garnering all the attention. Is the move in metals just seasonal buying or is it saying something more ominous about future inflation expectations? Is it fear about another proverbial shoe dropping in the banking sector or some other economic calamity? Gold is heading towards new highs and while it is supporting oil, black gold is a long way from its all time highs.

Of course OPEC loves all of this. Life is good in the OPEC cartel. Why invite non OPEC members to the party in Vienna when all the global circumstances are going your way. It is high-five time for OPEC as they are thrilled with the state of the global oil market. Things are so good right now, members are amazed at their own success. OPEC has the price of oil in a sweet spot where they can make money and not get criticized by the global community for jacking up prices. It does not get better than that. Oh sure, they can complain about member compliance, yet at the end of the day, to have oil trading just below $70 a barrel after the greatest financial crisis in generations, well it just has OPEC doing a victory lap. They should be thanking Ben Bernanke and the rest of the globes central bankers whose swift action saved the greedy cartel from less than stellar post crises moves.

Fred is a new Tropical storm in the Atlantic. At this time Fred does not look like it is going to be a threat to the Gulf or anywhere else for that matter.

Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or pflynn@alaron.com.

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

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