Precious metals and oil took a big slide in prices last week. There was a big sell off in both and we may not be done yet. I have no doubt that the price of oil and commodities in general will rise in the long term but in the short term is any body’s guess. For example, silver took a hammering last week as new margin requirements were announced last week which basically means that one cant use as much leverage when either investing or trading in silver.
This caused a huge sell-off as experienced traders and investors left the market and took their funds elsewhere where they knew they would get more favorable conditions. A barrel of crude oil a week ago was over $110 and last week came back down to under $100. The dollar strengthened against other currency’s which aided the big sell-off in commodities. Most commodities were down last week and its a cat and mouse game between the dollar and commodities as they are all priced in dollars. So when the dollar strengthens, commodity priced come under pressure.
Whats the trend long term?
Well I believe, The US are going to keep on devaluing the dollar in order to make their debts cheaper to repay. This will spike prices of commodities even further. They have already gained massively in the last 12 to 18 months. Look at copper, silver, oil, food commodities such as garlic, sugar, they are all way up in price over the last 18 months.
It is not so much that they are going up in price, it is because the value of the dollar (in which they are priced in) is going down. Do not confuse price with value. Your house could be worth more today than it was 5 years ago (in dollar or currency terms) but you may be able to buy less with the currency you receive if you sell it. (Less in value terms..)
If only people would start to think in value terms instead of currency terms, we would have a much more informed public. When you start to value things in barrels of oil, ounces of gold, bags of sugar, coffee, etc, you start to realise what has value as commodities throughout history have always kept their value ( as they cant be reproduced at the speed new currency can..)
Til next time..
Jack
All markets, currencies, and exchanges were originally based upon gold and it has been used as a benchmark of value in some form or other for thousands of years. When all else fails, there will always be gold. In times of inflation and volatility, gold prices always go up….period. There will be fluctuations due to supply and demand, but the overall trend during times of inflation is increasing gold prices.
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