heinz,
An excellent summation of the yellow dog's situation. With large allowances made for the manipulation of yellow gold, the are some similarities to the black gold market in the oil service and exploration and production stocks. There over the last few years there has been manipulation also, in the form of the infamous "missing barrels" of oil inventory etc. culminating in the famous $5/barrel article.
Without getting into the details of oil/gold comparisons (many pros/cons) the following things were evident a year and six months ago in energy:
1 We were not drilling enough NG to replace what we were depleting. Domestic oil production the same to a lessor extent (OPEC).
2 Price manipulation, whether by futures traders, missing barrels, convenience of cheap oil to spur economic recovery in Asia, etc., caused the price to fall to too low a level to make supply by industry economical.
3 Many companies were taken to the brink of ruin by this energy price bear. Without taxes prices for a gallon of oil/gas were about the same(Edit less than) a gallon of generic iced tea.
Utterly absurd.
4 Now finally the market has responded to the imbalance, NG price rising into the $4 area.
Gold is in a similar supply/demand situation only it is like the nations are using their Strategic Petroleum Reserves (analogous to Central Banks Gold reserves) to supply the domestic oil (gold) market, keeping the prices down. Then the futures (derivatives) market keeps the price descending even further. A snap back in price is a given, but it can wait a considerable time, as the recovery in energy stocks has taken over a year with many ups and downs.
Of course people don't burn gold in their SUV's like they do oil. Of course "no one" wants gold now, useless yellow dog that it is. Of course the dollar will only go up.
But whenever that changes it will change LARGE. There is less than an ounce of the yellow stuff for every citizen of the earth. The folks short gold had best pray there never comes a time when Joe Blow wants any of the yellow junk.
Dollar, Swiss Franc, Euro and Yen are the indicators, sentiment will be the driver.
Best of luck,
Roebear |
