At least one market likes the polar plunge

Polar Price Shock

Natural gas (NYMEX:NGH14) hit a major technical target of $5.40 overnight. When I made that call a long time ago many thought that that was not possible. Many had been lulled to sleep by global warming myths and winters that have been much warmer than normal. In fact I said that really the concept of adequate supply has not been tested by weather. Summers that have been cooler than normal and winters warmer than normal masked increasing non-heat related demand and increasing U.S. exports.

Well, guess what, Mother Nature has other things in mind. Take that Al Gore. Another Artic Vortex is driving not natural gas, but even heating oil is getting into the race.

Well at least gas prices (NYMEX:RBH14) are coming down, thank you Trilby Lundberg. Reuters reported that the average price for a gallon of gasoline in the United States dropped 3.46 cents over the past two weeks, retreating from its highest level since mid-October, according to the Lundberg survey released on Sunday. A gallon of regular-grade gasoline cost $3.3113 on average across the United States, down from $3.3459 two weeks earlier, according to the survey taken on Jan. 24. The average is 3.3 cents lower than $3.3443 average from the same period a year-ago period. The $3.3459 price published in Lundberg survey on Jan. 12 marked the highest level since mid-October.

The decline was because of a decrease in wholesale prices by suppliers and refiners, said Trilby Lundberg, publisher of the survey. "We can point to the entire downstream half of the oil business to cutting the price on the street in the past two weeks," Lundberg said. She expects gasoline prices to decrease by up to 2 cents during the near term, but not more. San Diego, Calif. had the highest average price of $3.60, while Billings, Mont. had the lowest average price of $2.84, according to the survey of major cities in the 48 continental states.

The gold market (COMEX:GCG14) is also showing signs of life. The market that was given up for dead by the investing class now looks like it has the potential of making a major market bottom. The rounded bottom on the daily chart seems to suggest that the market could be ready for a major run. Perhaps the weakness in the stock market and the VIX shaken out of its overconfidence, apathy is the reason we are ready to make a major move. Not to mention that India is contemplating lifting tariffs and import restrictions to foil a growing black market.

Many of the gold haters jumped on the bearish band-wagon driving speculative short positions to under $1,200 an ounce, below what most people feel is the cost of production at a time when the VIX was disturbingly low. The spread between stocks and commodities were at a 100-year divergence signaling that stocks were way overvalued or commodities like gold got hit way too hard. I was even asked if I felt bad if I had been saying to keep exposure to gold and the answer is no. I have been a long term bull on gold and this is only a six-month correction in a 13-year bull market, especially when the reasons for the correction were based in part on a false hope and an overly optimistic outlook on the global economy. While gold may have rallied to far too fast, the same is now true of stocks. I think that by the end of the year some people may be kicking themselves for abandoning gold.

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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