As noted on this blog during overnight trading, gold hit a high of $875, then continued to rise to $880.90 in the noon hour on Tuesday January 8, 2008. That is an all time record high!
Sources tell Strategy Update that the banking institutions are pulling money out of the stock market and buying oil, like there is no tomorrow. They must know oil will continue to rise (past $100 -- and then some). Which is a bet that inflation is going to be worse than expected in early '08. Gold will follow oil's rise, as well -- and many of the gold mining stocks are up as much as 8%-9%, as well.
Part of the problem, keeping the price of oil (and therefore gold) high, is the threat of Nigerian rebels trying to seize control of the oil fields, resembling a scenario you would expect to see on "24". And according to Rueters, the attack may happen in days.
If the rebel attack is successful (see article below), it would surely make the price of oil skyrocket immediately, and even the fear of attack (and the current turbulence) is enough to keep gold and oil prices at, or near, record levels.
If oil stays high, or goes higher -- as these factors may be indicating -- that means you can expect inflation to drive the price of food and other consumer goods. Higher gas prices drive up food cost in the production and delivery. Same thing with your favorite gadget or device at your favorite retail store.
All of this, at the same time the jobs report sent the world the signal that U.S. consumers would be cutting back on gas purchases at the pump, and discretionary spending itself.
So while it initially appeared as though oil prices would drop on this bad U.S. job/economic news (driving oil prices down, on fear of reduced demand)...you have oil speculators keeping the prices high (and driving the prices up) -- and now, even the conservative bank investors are reading the writing on the wall, and putting the money where it will not only be safe...but skyrocket up, instead of down.
Sources predict gold will easily hit $900 in the next three months. (They actually put at $1000 target on gold over the next three months -- but I'm being conservative.) But that's the way it's going down in the global economy.
Also keep in mind, banks know when the derivatives that come due in February, it's gonna be so south, you're gonna get an arctic freeze...and that's when they bet that oil will be skyrocketing...and there will no no where to hide in any of these safe mutual funds or most other stocks.
All of this will put the Fed between a rock and a hard place when it's time to consider further rate cuts the market is crying for. (If you cut the dollar rate, oil will rise even higher.)
Here's the report on Nigerian oil turbulence:
Jan 8 (Reuters) - Armed groups in Nigeria's oil producing south are building up weapons and supplies for a major attack on an oil facility in the world's eight largest exporter, militant and security sources said on Tuesday.
The planned rebel offensive against Africa's largest oil industry comes after the collapse of a government peace initiative and in response to increased military raids on militant hideouts in the region.
Security consultants working for oil multinationals said they had also picked up talk of an attack on the industry in Rivers state within days.
Suspicions have also been raised by a leaked confidential army report outlining a proposal for a massive increase in troop numbers and weapons to wipe out rebel camps across the region of mangrove-lined creeks and swamp almost the size of England.
Another militant source said Tom was now stockpiling large quantities of arms, food and water for another offensive.
The most powerful rebel force in the region, said last week it was supplying Tom with weapons including anti-aircraft missiles and had reunited rival factions after a split last year.
It reiterated its objective of completely halting Nigeria's exports of two million barrels per day of crude oil.full story
StrategyUpdate.com
Disclosure: AUY
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