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During the past six weeks gold has broken above two very important resistance lines thus giving clear buy signals. And I presented several more arguments calling for much higher gold prices in my Money and Markets columns of September 9 and October 14.
But Now Another Important Market
Has Given a Clear Buying Signal …
As you can see on the following chart, crude oil prices have been hovering between $60 and $75 for roughly four months. At the same time the Price Momentum Oscillator (PMO), which signals the strength of a price trend, has corrected its overbought readings by coming back down to the zero line.
Source: www.decisionpoint.com
While the price of oil was going sideways, this momentum indicator was creating an interesting bottoming formation.
Then, last week, an important event occurred: The price of oil broke above its upper boundary, and the PMO finished its consolidation. Both lines on the chart, price and momentum, were thus giving key buying signals.
My analysis tells me that the next price target stemming from this four-month consolidation formation is approximately $100 per barrel.
That’s not particularly good news for you or me as consumers. After all, we’ll have to pay more to fill up our gas tanks, heat our homes, and more.
So it’s difficult for me to understand how some pundits can claim that rising oil prices might be a good thing for the economy …
The way I see it, higher prices are like an additional tax for American and European consumers and businesses alike. They’ll dampen the still-nascent economic recovery before it gets real traction.
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| As governments shift their printing presses into overdrive, you can expect inflation to surge. |
What’s more, rising oil prices are in step with the message coming from gold’s price advance. Here’s why I say that …
Rising Prices Are Caused By
Governments’ Policies …
Rising gold and oil prices are symptoms of the inflationary monetary and fiscal policies that have been implemented. These were without doubt global governments’ absurd and counterproductive answers to the popped real estate bubble.
My basis for this conclusion is very straightforward: If governments continue printing boatloads of money, the prices for goods and services have to rise sooner or later. There’s no way they won’t!
And whether it happens sooner or later depends on certain circumstances, such as changes in the velocity of money or money demand.
The breakouts in gold and crude oil are like early warning indicators. And the commodity markets are clearly telling us that inflation will rise sooner rather than later and will become a major problem for the world economy.
Fortunately as investors, we can turn that problem into a tremendous opportunity. And my colleagues and I will continue to show you how to do that every chance we get.
Best wishes,
Claus
About Money and Markets
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Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Nilus Mattive, Claus Vogt, Ron Rowland, Michael Larson and Bryan Rich. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amy Carlino, Selene Ceballo, Amber Dakar, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
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