The gold bugs basically love conspiracy theories and their complaints that central banks are keeping gold prices “artificially” low is another crack pot theory. They didn’t complain when speculative hedge fund buying was forcing gold prices to actually “artificially” moving gold prices up through the roof hitting 730, without any fundamentals backing them. There is no consipracy theory but basic fundamentals that Gold had too much speculative money in it that is now leaving and inflation is coming down thus putting fundamental pressure on gold prices. I cannot understand people here who expect housing prices to decline 50-70% and still expect huge inflation in the coming years. Such huge declines will kill economy, kill commodity prices and reduce inflation (price appreciation not money supply) and barring a dollar collapse I don’t see gold going up. I will use gold for diversifying my portfolio though (5%).
As for oil prices, I said so when people were posting $100 oil threads that there is too much speculative money in oil that is going to run away (geo-political situation is ok, a clean hurricane season). I think we are going to run into a transitionary period where oil prices will go down to $55-65 range. If that range is broken then it will go to $40 until the Asian economies can create a domestic consumer maket.
Commodity bulls miss this very importaant point that China/Japanese economies are extremely export dependent right now and it will take few years before they can sustain their growth by domestic consumption. Commodity bulls keep repeating their pet sentence “Its a correction since nothing has changed in supply and demand” yet they know deep down that commodities demand is diminishing because of the economic slowdown expected in the biggest of world economies and the lack of an alternative consumer to replace that demand. I am keeping an eye on Japanese and Asian consumer and their retail prices as I think they will indicate the next time commodities will start going up again.
