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.
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.
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.
Claus Vogt is the editor of Sicheres Geld, the first and largest-circulation contrarian investment letter in Europe. Although the publication is based on Martin Weiss’ Safe Money, Mr. Vogt has provided new, independent insights and amazingly accurate forecasts that, in turn, have contributed great value to Safe Money itself.
Mr. Vogt is the co-author of the German bestseller, Das Greenspan Dossier, where he predicted, well ahead of time, the sequence of events that have unfolded since, including the U.S. housing bust, the U.S. recession, the demise of Fannie Mae and Freddie Mac, as well as the financial system crisis.
He is also the editor of the German edition of Weiss Research’s International ETF Trader, which has delivered overall gains (including losers) in the high double digits even while the U.S. stock market suffered its worst year since 1932.
His analysis and insights will be appearing regularly in Money and Markets.
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