The Criminal Dollar

October 19, 2007 | By | Reply More

This week has seen the price of oil peak at its highest yet.

The reason given by so many pundits in the popular press is the Turks incursion into Iraq to hunt down Kurdish terrorists, who want their own homeland, giving rise to increased tension in the oil producing regions of the Middle East.

As so often in happens in the real world of market supply and demand, it is necessary to look below the superficial, the politically correct, the “I don’t want to rock the governments (Republican) boat” and consider the real reasons why oil has risen and will continue to rise for the foreseeable future and drag gold along by the coat tails.

At the end of the day, taking into account the ever-increasing consumption of oil by China and other emerging nations, the supply problems that are developing, including lack of refining capacity, it all boils down to what could be called the criminal dollar.

In the current circumstances there is little hope that the greenback can claw back any of its steady loss of value.

Even the upcoming G7 meeting is hardly likely to suggest anything other than platitudes to restore any degree of faith in the US$.

It is sad, but more likely than not, true, that the dollar will continue its downward spiral against most other currencies, possibly at an increasing rate as the principal holders bail out.

Sovereign Funds set up by China and the oil producers, just joined by Libya, may slow the process as they accumulate holdings in US companies but it remains to be seen whether Congress may decide sooner or later that enough is enough, particularly if strategic interests go under the hammer.

As the dollar drops so will oil increase in cost per barrel and this is as good a reason as any for the price of gold to increase, dragging silver slowly along with it.

Sooner or later silver will sustain a substantial break out of its $12.50 – 13.50 band (Dec silver closed at $13.803 yesterday, up 5.03 cents) so keep an eye open.

This week’s message is keep watch oil and the dollar and see the price of gold reflect their movements.

Along with gold and silver, other precious metals are benefiting in terms of the dollar with Jan platinum leading the way to close at $1447.60 up $9 on the day.

On a final note, in South Africa the worlds leading platinum producer closed a shaft down this week when a worker was killed, heightening concerns in the country over mine safety and supply, and the consequent labour problems, that affects all mining in South Africa.

In addition year on year SA is producing less gold reflected in less worldwide production to meet a growing demand.

Do not be fooled by reports going the rounds concerning the discovery of the “ worlds largest gold deposit” that may be true but it is unlikely to be able to come on stream for up to four years.


Keep the faith in Uranium, particularly established producers, more on that later.


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