Learning from Black Gold's charts
Crude Oil, or black gold, has been on a tear these last couple of years. But this is a Gold board.... Why am I talking about Crude Oil?
Because we can learn a lot from what happened in the last decade with Oil to get an idea of where Gold might be headed. Supply and demand, depression and euphoria, it is the same story, always. For all commodities.
You see, in the end of the 90's, Oil had hit a really rough patch. I remember prices of $15 per barrel, and they were falling still, and analysts were coming out with price predictions of $8 per barrel. Oil driller stocks were collapsing (a proxy for drillers is OIH, the ETF tracking them as a group), and bankruptcies were imminent. Oil exploration budgets were lowest in years-no one wanted to start digging more wells or find Oil in new places, because it was a money losing business anyway, they said.
And then suddenly, things turned. Oil prices started to move up. And people wouldn't believe that a long term trend was in place. The twin factors of low exploration and increasing demand from China (and in the last couple of years, India) lead to the biggest price rally in Oil in decades. Today it trades at $60 per barrel, XOM is almost the biggest company in the world (GE has been for a while, XOM has overtaken it in the last year, only to fall back down recently) and people are still not saying that Oil is going up forever, or $100..., which would make me think that a top is close. Crude Oil remains in a secular bull market.
I think gold is headed up like this. Falling gold prices made companies very wary of putting funds to exploration, and now we have a shortage of gold, coupled with increasing demand from India and China. A secular bull is in place. And prices are headed higher for years to come.
A top is when everyone thinks it is going higher. And gold is nowhere near that yet.
Sanjay John G.
Because we can learn a lot from what happened in the last decade with Oil to get an idea of where Gold might be headed. Supply and demand, depression and euphoria, it is the same story, always. For all commodities.
You see, in the end of the 90's, Oil had hit a really rough patch. I remember prices of $15 per barrel, and they were falling still, and analysts were coming out with price predictions of $8 per barrel. Oil driller stocks were collapsing (a proxy for drillers is OIH, the ETF tracking them as a group), and bankruptcies were imminent. Oil exploration budgets were lowest in years-no one wanted to start digging more wells or find Oil in new places, because it was a money losing business anyway, they said.
And then suddenly, things turned. Oil prices started to move up. And people wouldn't believe that a long term trend was in place. The twin factors of low exploration and increasing demand from China (and in the last couple of years, India) lead to the biggest price rally in Oil in decades. Today it trades at $60 per barrel, XOM is almost the biggest company in the world (GE has been for a while, XOM has overtaken it in the last year, only to fall back down recently) and people are still not saying that Oil is going up forever, or $100..., which would make me think that a top is close. Crude Oil remains in a secular bull market.
I think gold is headed up like this. Falling gold prices made companies very wary of putting funds to exploration, and now we have a shortage of gold, coupled with increasing demand from India and China. A secular bull is in place. And prices are headed higher for years to come.
A top is when everyone thinks it is going higher. And gold is nowhere near that yet.
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Sanjay John G.
1 Comments:
Like your comparison of Gold bullish trend with Oil. Both are headded higher.
C. Masnik
NY City
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