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
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20
Global "Debt Mountain": Beware of This "New Peak" - 13th Nov 20
Overclocking Zen 3 Ryzen 5600x, 5800x, 5900x and 5950x to 4.7ghz All Cores Cinebench R20 Scores - 13th Nov 20
Is Silver Leading Bitcoin or is Bitcoin Leading Silver? - 13th Nov 20
How Elliott Waves Simplify Your Technical Analysis - 13th Nov 20
How to buy Bitcoins using debit/credit card? - 13th Nov 20
Will COVID Vaccine Kill Gold and Silver? - 12th Nov 20
Access to Critical Market Reports - 12th Nov 20
Stock Market Dow Futures Reach 30,000 on News of COVID-19 Vaccine Trials Success - 12th Nov 20
8 Terms & Conditions You Must Know Before Asking For Life Insurance Policy Quotes - 12th Nov 20
Gold Stocks Post 2020 US Election Outlook - 11th Nov 20
Champions’ League Group Stage Draw: All You Need To Know - 11th Nov 20
Stock Market Secular Trend - 11th Nov 20
Stock Market Correction Curtailed by US Election - 11th Nov 20
What Causes a Financial Bubble? - 11th Nov 20
Ryzen 9 5900X RTX 3080 - Scan.co.uk vs Overclockers.co.uk UK Custom PC System Builder Review - 10th Nov 20
Killing Driveway Weeds FAST with a Pressure Washer - Saving Block Paving from LOTS of WEEDs - 10th Nov 20
Trump Fired, Biden Hired, What Next?  - 10th Nov 20
Looking for a Personal Loan? Here Is What You Have To Know  - 10th Nov 20

Market Oracle FREE Newsletter

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

Crude Oil, Silver, Gold and Real Money

Commodities / Gold and Silver 2015 Sep 08, 2015 - 02:01 PM GMT

By: DeviantInvestor

Commodities

I’m not convinced!

  • Supposedly crude oil prices will stay low for a long time and perhaps drop into the $20’s. The Internet is filled with reasons explaining why crude oil prices will drop.  A few are:
  • Saudi Arabia is a swing producer and will provide what the world needs, regardless of price, because Saudi Arabia needs the revenue and employment for its people.
  • Iranian oil will soon hit the market and provide even more supply.

  • The global economic slow-down will reduce demand and prices for crude oil.
  • US shale oil production will remain high because those producers desperately need the revenue for debt service. They will pump all they can and maintain supply.
  • US foreign policy wants low oil prices to damage the economies of Russia and Iran. Supposedly there was a deal made with the Saudi government.
  • Renewable energy will reduce demand for crude oil.
  • US dollar strength will push oil prices lower.
  • And many more.

I’M NOT CONVINCED.

  • Lower oil prices may be helpful at the gasoline pump but they are deflationary, and central banks absolutely do NOT want deflation. Central banks may not be able to drive oil prices higher directly, but they certainly can drive the value of currencies lower.  They have for over 100 years, so don’t expect them to reverse policy now.
  • The world needs energy, lots of energy and more every day. Crude oil is an important supplier of the energy required to run modern transportation and economies.
  • These low prices will not last, in my opinion. They never have.  Further, low prices will bankrupt a number of oil companies, shale companies, and reduce supply.  As they say, “the cure for low prices is low prices.”
  • At every market bottom one will hear a dozen reasons why prices will go even lower and cannot go higher. Those reasons are often wrong.
  • At every market top one will hear a dozen reasons why prices will continue even higher and, except for tiny corrections, cannot go lower. Markets always correct, sometimes harshly.

WHAT ABOUT RELEVANT RATIOS?

Examine the following Crude Oil to Silver ratio (crude oil priced in real silver) for the past 30 years.  Yes, the ratio can drop further, but based on 30 years, it is currently quite low.  The most likely next move is a higher ratio.

Examine the following Crude Oil to Gold ratio (crude oil priced in real gold) for the past 30 years.  Yes, the ratio can drop further, but based on 30 years, it is currently quite low.  The most likely next move is a higher ratio.

Examine the following 20 year chart of crude oil prices.  Note the blue vertical lines that occur every 83 months – about every 7 years.  The last two important lows were late 2001 and late 2008.  A similar low appears to be occurring now, about August or September 2015.

 

There is no guarantee that a 7 year cycle will mark a bottom in the crude oil market now or soon.  But don’t ignore the possibility.

Other reasons to expect a bottom in crude oil:

  • The ratios to silver and gold (above) indicate that crude oil, when priced in real money such as gold and silver, are near 30 year lows.
  • The technical indicators (green ovals) suggest that monthly crude oil prices are oversold and ready to turn up.
  • The world is pushing toward more war. Higher crude oil prices and war go together.
  • Central banks want inflation. They are likely to get it, and more than they want.  Crude oil prices will rise as currencies devalue.

CONCLUSION:  I’m not convinced that crude oil prices will drop much from here or remain low for many more months.  Regardless of the “reasons” listed at the beginning of this article, I think higher crude oil prices are much more likely than lower prices in six months or less.

Gary Christenson

GE Christenson aka Deviant Investor If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail

© 2015 Copyright Deviant Investor - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Deviant Investor 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