With the whole world economy in a bit of a funk you wouldn’t expect oil to be over $100 and gold to be over $1,700. Or would you?
As to oil, much of the emerging world is still growing strongly. Over the last 4 years, for example, China has grown 70 times faster than the US. That’s a lot more income in a lot more pockets in China. And that’s a lot of people who want to use from energy. It’s only natural that the price goes up…because supplies are sluggish; they can’t increase as fast.
There are also growing numbers of people who suspect the US and Israel are about to start another war. The Republican candidates are talking about Big Sticks. They expect to get money from the defense industry…and votes from the lumpen voters… by promising to throw their weight around overseas.
A war with Iran might be hard to contain. At the very least, you’d expect the price of oil to soar…which would almost certainly seal the deal on a worldwide depression.
As to gold, it appears that governments are buying. Here’s the Bloomberg report:
LONDON—Total central-bank gold purchases in the third quarter more than doubled from the second quarter and were almost seven times higher than a year earlier as countries continued to diversify reserves, according to a World Gold Council report.
At 148.4 metric tons, gold buying among central banks was at the highest since the sector became a net buyer of the precious metal in the second quarter of 2009, according to the quarterly report.
Central banks and other official institutions, by comparison, had bought 66.5 tons of gold in the second quarter and 22.6 tons in the third quarter of 2010.
Oil is up… gold is up… the world economy is down. And attitudes, hopes, dreams and plans are changing in line with the global economy gloom.
for The Daily Reckoning Australia