A long awaited report on the XL Keystone pipeline stated what everyone knew all along, the State Department said the Keystone XL pipeline would not have a significant impact on global warming or greenhouse gasses. In a world of politics, the Keystone XL pipeline became a political line in the sand. It was never about where the pipeline was designed to go like over the aquifer, but about how oil sands oil is produced. At first the argument was that Keystone was a threat to the massive Ogallala Aquifer — one of the world’s largest underground sources of fresh water that holds enough water to cover the country’s 48 contiguous states two feet deep. The Ogallala stretches beneath most of Nebraska from the Sand Hills in the west to the outskirts of Omaha. And it runs from South Dakota well past Lubbock, Tex.
Yet when the pipeline was rerouted, the real truth came out. It was never about the aquifer but about how oil is produced. Opponents say that the production of that oil added to greenhouse gasses.
Yet even when it was clear that the oil would be produced and moved by rail or by pipeline to places like China, political ego and ideology kept the Obama Administration from making a decision, offending our Canadian friends and costing the U.S. thousands of jobs.
Oil (NYMEX:CLH14) seems to be swayed down by global economic worries. Gold (COMEX:GCJ13) is getting a bounce on turmoil in the emerging markets and signs that India may be letting up on gold import restrictions. Post taper, gold has rallied. As we said before, many thought that tapering was bearish for gold but we are now finding out that at first it was bearish but long term it is bullish. As we said, gold will start to look more attractive as an alternative to a stock market that may not be a one-way ticket. The increase in rates also unmasks the weakness in emerging markets that have fed off Fed policy.
In the physical market, supplies are tight. Mark Byrnes of Gold Core wrote that “sales of gold coins by the U.S. Mint rose 63% in January to the highest since April. Sales climbed to 91,500 ounces from 56,000 ounces in December, while sales of silver coins almost tripled to 4.78 million ounces, the highest in a year, the data showed. Part of the reason for the surge in demand is due to dealers restocking inventories and due to collector demand for the newly minted 2014 coins.”
Natural gas continues to drive the bears wild as shocking winter has led to record demand and a challenge to supplies unlike anything the market was prepared for. Another cold blast in the Midwest will keep the market supported. Not to mention the possibility of a 250 withdrawal from storage.