About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Monday, August 25, 2014

Gold, Oil, & The US Dollar

Gold got interesting as a long side trade in late 2013 at $1200 oz. When the US economy
does strengthen as it has on strong liquidity growth, the gold price normally gets a cyclical pop.
There may be some extra fizz in the pop if the US trade deficit widens on faster import growth and the USD weakens. The year started out that way for gold and I figured it could top $1400 by year's
end. That may still happen, but some important crimps in the story are unfolding. US oil
production is surging so strongly that it has tipped the supply / demand balance in the oil
market in favor of supply. The oil price has fallen sharply since the end of June. The weaker
price plus less demand for imported oil has resulted in a stronger dollar because the trade
picture is holding up better than expected. The weaker oil / stronger dollar combo has been
punishing the gold price and although gold is developing an oversold, there may be some more
downside because gold is at a small premium to the oil price. Gold et al Chart

Now winter blend fuels stocks will need to be built soon, so the oil price will move into what
is normally a strong seasonal period during Sept. / very early Oct. Normally, the oil price will
make a yearly high around then. This might not happen this year, but there should be some
degree of positive bounce and gold might well get a positive kicker. The oil price has broken
down from a basic rising trend dating back to mid - 2009, and this development may be very
much worth noting.

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