Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Gold Market Shifts Focus to Real Global Inflation Rates

Commodities / Gold & Silver May 21, 2008 - 02:55 PM GMT

By: Christopher_Laird

Commodities

Best Financial Markets Analysis ArticleGold is shifting focus to world inflation. There is widespread inflation near 10% or more across the world. The EU is escaping some of the worst of it, but still is likely looking at 4%. Inflation in China 10%, India 7.6%.The US has 8% inflation (according to ShadowStats.com based on the method of calculation before the Clinton era, and not that ridiculous 3% which is whitewashed data). The Mid East 10% plus. 

Just like Richard Duncan said, in the seminal book The Dollar Crisis, excess USD reserves flowing to our trade partners is causing inflation in those countries, as they have to wash that money into their own currencies.


High demand for essential commodities, such as grains and oil, is forcing up world inflation. Both are in shortage. If the food shortages are already causing panic buying of rice, so then, oil is ready to see possible huge price spikes since the world has not seen rising oil production since roughly 2005, but oil consumption continues to rise dramatically. There used to be some extra world oil production capacity, but now there is little to none.

In addition, there is a big power shortage in much of the world. That affects mines, as do record diesel prices. But, with shortages of oil and grains, the inflation genie really popped out of the bottle. The poorer nations and the big developing ones are scared of what rising rice and wheat prices will do to their stability. Fertilizer prices have doubled and more in the last year. Rice, doubled and more, wheat doubled and tripled then fell back, but is still quite high. Wheat, rice, oil are all in shortage. Grain and oil prices are inputs to just about all other prices.

Since energy and food are in shortage, unless there is some supply relief, food and energy inflation will remain with us. This is not a short term story. Grain consumption has increased faster than supply, and most nations have sold off their surplus in recent years. That means that there is very little cushion for grain prices in the coming year. Oil is in the same predicament, as world oil production has already peaked, arguably, in 2005. Since then, world oil production has largely leveled off. There is no surplus oil capacity.

Gold market shifts focus to inflation

As story after story filled the news about grain shortages this year, and oil production peaked and there is little excess capacity, the gold market just shifted its focus in May to the inflation story. Just prior, the gold market was focusing on the (supposed) improvement in the credit crisis. The credit crisis had boosted gold from the $600s to over $1000 but it fell back a bit on the supposed improvement in the credit crisis. But, now it looks as if gold is getting ready to retest $1000, as its new focus is on the big world inflation story, particularly in food and energy. And as I said, this inflation story is not going away anytime soon.

One example of how the gold market has shifted focus to inflation is how gold has reacted to news on its commodity/jewelry demand. With gold prices this high, jewelry off take has been way off (tonnage wise), and scrap gold in the hundreds of tons have hit the market. Nevertheless, gold is rising now and likely to keep its big gains since it gained over 50% since the August 07 credit crisis began. Gold shifting focus to inflation allows it to keep these high levels longer term.

Another example of how gold shifted focus recently to inflation is its rally now after news that the credit crisis is improving. There was some question as to whether gold was going to keep correcting a few weeks ago. I think it is reasonable to say that gold has now begun a new ascent, possibly to a new high over $1000. And this recent ascent is driven by all the inflation news around the world which is a longer term trend.

It certainly helps gold if oil continues its ascent this summer as the peak driving season begins. Of course, high gas prices may cause demand to drop. Nevertheless there is big pressure on oil prices from this upcoming seasonal demand, and it's quite possible oil could hit $150 before correcting. 

Regardless, there appears to be a monster oil rally in progress, although there is a risk of a significant correction since oil has risen so fast recently.

If you agree oil production has indeed peaked, then we are likely to see oil prices in the $150 range, and gold will rise dramatically to over $1000 based on that alone probably. That is because oil prices are one of the key drivers for inflation, since oil is used to make and transport most products. And again oil, being the world's predominate energy source, is a necessity. Inflation in necessities is the big story emerging this year.

We mentioned to subscribers in recent weeks that, since there is big inflation in necessities now, and that it was just a matter of time before the gold market focused on this. That is now happening.

On May 8, we alerted subscribers that gold was likely bottoming and going to turn around based on the gold market shifting focus to the world inflation story. Gold was $880 then. The gold market was in the process of shifting focus to world inflation at that time. We were one of the first newsletters to make that call. You can see that alert in our sample alerts page. Gold could always retest $900, but we see gold heading to $1000 in coming months. 

By Christopher Laird
PrudentSquirrel.com

Copyright © 2008 Christopher Laird

Chris Laird has been an Oracle systems engineer, database administrator, and math teacher. He has a BS in mathematics from UCLA and is a certified Oracle database administrator. He has been an avid follower of financial news since childhood. His father is Jere Laird, former business editor of KNX news AM 1070, Los Angeles (ret). He has grown up immersed in financial news. His Grandmother was Alice Widener, publisher of USA magazine in the 60's to 80's, a newsletter that covered many of the topics you find today at the preeminent gold sites. Chris is the publisher of the Prudent Squirrel newsletter, an economic and gold commentary.

Christopher Laird Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules