GOLD (COMEX) Oil and Gold

Originally posted by JID ↑

I don't know how the technical traders will correlate the two in the short term.

There are a few rabbit holes to dive into however;

(1) I am reading that 15% of total junk-bond issues (total of $1.3 trillion) have been to the US shale and energy companies. This Saudi led OPEC move is a direct attack on this sector (much as BHP and RIO are attacking smaller iron ore producers). There are concern that banks could face mounting debt defaults - are energy loans the 2015 Sub-prime crisis?

(2) Falling energy prices will contribute to deflationary conditions which the Western Central Banks of US, Japan and the EU are doing everything to try and stave off. Will this contribute to the ECB finally pulling the trigger and the US getting drawn back into QE4 at some point?

(3) Russia, as the worlds largest energy producer, benefits from higher oil prices and it is in their best interests to see "the middle east burn". Will geo-political tensions increase around that region with a carefully aimed poke from a sharp stick wielding Putin?

So to summarise:

(1) Increased prospect of financial crisis
(2) Deflationary pressures leading to more QE
(3) Increased prospect of geo-political tensions

Sound good for gold at some point ...

(Not to mention falling input costs for the gold miners)

Cheers
John

Expand

John

"(2) Falling energy prices will contribute to deflationary conditions which the Western Central Banks of US, Japan and the EU are doing everything to try and stave off. Will this contribute to the ECB finally pulling the trigger and the US getting drawn back into QE4 at some point?"

This is very poor Macro analysis.

Falling energy prices in the economies of energy importers (like Europe and America) where prices and incomes remain constant, will lower costs, increase profits and release money for consumption spending in other sectors. What you envisage is only likely if all incomes fall in line with falling energy prices. That isn't happening in Europe and America.

I'm sorry, but your scenario (2) is nonsense.