Archives: 2007 September

Crude oil surged to above $80 a barrel for the first time, a day after Opec decided to boost its output of crude oil in an effort to ease cost pressures.

That shows just how tight crude oil supplies are. The Saudi announcement was intended to take some of the supply pressure off the market. However, today the US reported a sharp drop in crude oil stocks and this news completely over shadowed the news about the planned Saudi crude oil production increase.

An ill wind is blowing over the worlds financial markets. Record prices for crude oil, a weak US housing market, hedge funds and investment banks in trouble with a boat load of sub prime mortgage home loans going bad, record foreclosures of homes in the US, and the inability to value exotic derivation investments into the Trillions are more than troubling.

The potential is present for a worldwide financial disaster of epic proportions. Throw in a US Dollar that is collapsing and the certainly of turmoil in the world’s financial markets is at 100%.

Gold for December delivery closed well about $700 an oz on Friday, September 7th as the jobs data released for August showed the loss of 4000 jobs for the period. The surprise report, the first negative report for jobs in four years, sent the Dollar reeling.

As the Dollar falls the value of gold would normally increase. Gold has been a good storehouse of value for thousands of years. In the present environment of governments creating obscene amounts of paper money with no backing and with hedge funds and investment banks having created and holding in their “investment” portfolios massive amounts of non marketable derivative securities the prudent investor should have at least 10% -20% of holdings in gold in his investment portfolio.

I would say that the chances of a financial market meltdown and complete panic are now at about 100%. And how high can gold go?

Ahhhhhh, that is the question, isn’t it. I wish that I knew. All that I do know is that on an inflation adjusted basis gold is still cheap. I expect that the current bull market in gold is still in its early stages as the public hasn’t been really excited about gold just yet.

That will likely change quickly as stock markets around the world collapse and a distressing number of “name” investment banks and hedge funds, as well as commercial banks and mortgage companies go bust.

Wheat for December delivery surged to another record high today closing limit up ($0.30 a bushel) to $8.05. Wheat prices have been in a major uptrend since May when it became apparent that stocks would be under severe pressure as drought continued in major production areas while global demand continues to be strong.

The price action in wheat this year is probably a taste of things to come as climate change makes itself felt around the world. With wheat stocks at 26 year low levels should climate change become increasingly severe we are likely to see wheat and other related feed grain commodities , like corn, move to ever higher levels.

Of course, market volatility will be high so it would be wise not to get too greedy and over leverage your trading positions on this bull move. It is a real shame to be right on market direction yet be knocked out of the trade on a temporary price correction.