Stock Market Horizons: Gold $3,000, Oil $70
In the last two decades, already though gold prices have dwindled from $850 to $350 an ounce, there are nevertheless market gurus who predict gold price to hit $3000 an ounce. Hecla seems to be quite bullish about the future.
With oil prices fluctuating between $40 and about $60 a barrel, the industrialized nations are totally dependent upon the foreign oil supply. The US government has a deal with the Saudis for that very purpose. The Saudis have to keep the oil flowing and we, in turn, will keep the monarchy in strength. This is a healthy arrangement for both parties in the short run.
I have a serious problem with the $3000 an ounce gold price. If this prediction were to come true, what shall be the interest rate? Can someone answer it for me?
In contradiction to this Saudi deal, the Bush Administration is committed (not officially) but morally, according to the pronouncements of G.W. Bush to stabilize the complete Middle East vicinity by establishing democratic systems of government in a decade.
We can’t have it both ways. We have not succeeded to find any viable supplies of different energy consequently far. The environmentalists won’t let us dig for oil and the car industry has invested millions in the development of better and more energy efficient cars.
At $3000 an ounce for gold, we must continue an interest rate of at the minimum 20% (my guess). The million dollar question is: what will happen to the mortgage business and the housing industry as a whole? The rate of inflation at present levels will not allow new home buyers to pay their mortgages. May be there will be a sudden raise in the GNP. But how? What will happen to the money supply? Are we going to keep on printing money as we do now?
This was one scenario consequently far according to bulls. But the produces view the whole problem differently.
The Oil Price Dilemma
In 2004, we saw a big spike in the oil price. Some analysts today are already forecasting the price increases to more than $60 a barrel in 2005 or already $75 to $80 in the event of a major supply disruption.
The growing need for oil specially from the U.S. and China underlies most of the price increases because oil is priced in dollars around the globe. A weaker dollar method less revenue for oil producers.
European Central Bank President Jean-Claude Trichet cited oil prices as one threat to economic growth. The world currently consumes more than 84 million barrels a day of oil. OPEC currently is producing 29 million barrels of oil everyday, approximately a third of world supply.
Are we going to be forced to pay $60 a barrel for oil? Does this average that the OPEC nations can or may rule the global economy by oil? The banking industry has been in a state of turmoil for the last two decades. There are a few reasons for this. The illegal but quite common Havala system of money exchange accounts for part of the problem. The next question is the drug trade funded and operated under cover by some governments in strength. The money from such trades (trillions of dollars) is laundered by edges illegally. Civilized nations are supposed to be ethically run, but are they when it comes to large sums of money?
The rules of the banking industry are too old to fit in the fast changing climate of money move from the sale of oil and illegal drug sales. No one has come upon a solution consequently far. The rate at which the oil and drug trade money changes hands is much faster than the rate at which the edges can successfully launder it legally. It method that trillions of dollars in cash keep unaccounted for. With that kind of cash it is not difficult to buy weapons or anything you like to topple a government with good planning.
We had hoped the Caspian Sea oil to flow to the US, but that has not happened however. The Iraqi war and the Afghanistan situation have both tilted the balance of strength in the civilized (industrialized) world. But in whose favor?
The purchasing strength of the US dollar continues to decline. The global political instability continues to keep a problem to continue with.
The great changes in the crust of the earth have caused the ocean levels to rise and fall in some places. This will bring about emotional changes. All these factors create a very flexible ecosystem and we will see the changing weather patterns ultimately bring about changes in the climate and vegetation in many countries.
What does the wave theory say about the stock markets of the future and the world economy as a whole? The mass migration of peoples of the earth will be the next step. This can average that certain governments will lose sustain of their people and consequently fall from strength.
We can expect the stock markets to become more volatile than they have ever been. Fortunes will be made and lost. Let me remind those who dream of a $3000 an ounce gold price that the gold smugglers can bring tons of it from the Far East and South American routes, buy the most prestigious US similarities and create chaos in the world economy. If this happens, you will not care about the DJIA. Why? Because it will cease to exist. We are talking about a very different ball game.
Ninety percent members of the UN are dictatorships. And they would not like to lose strength should the gold price rise to $3000 an ounce. I quite forget that the US economy is not backed by gold. How can we have a gold standard? Well, we can’t for the time being. What’s your opinion?