Gold looks bad

[Master Shake]

Re: Gold looks bad

I have posted many times over the years that trying to predict the short term movements in the price of oil is a mugs game. But over time the fundamentals tend to assert themselves. A dis-inflationary part of the cycle, coupled with a still slow and perhaps slowing global economy plus the recent significant additions to crude production in North America would suggest the potential for a decline in oil prices sometime in the coming year or so, is greater than a continued rise from these levels.

I wouldn't bet the farm on this outcome. But I wouldn't be going long oil at this time either...unless one thinks the Middle East is really going to blow up and create the mother of all supply disruptions...

So, per EJ's GAGFO hypothesis, not a good time to buy gold or gold mining stocks.

[bpwoods]

Re: Gold looks bad

@ GRG55 : "the recent significant additions to crude production in North America would suggest the potential for a decline in oil prices sometime in the coming year or so .." After the decline - then what? Prices go up, again. That 'significant addition' sure costs a lot of energy input.

"[unless] one thinks the Middle East is really going to blow up and create the mother of all supply disruptions..." No, it won't 'blow up' - as in BANG!, but there are a lot of folk there and they need more and more energy. So where will they get it? They also need more and more income, so they need to sell more and more of that oil. That suggests a nasty squeeze. They are also a tad short on water. That's they're first problem!

Stay calm on the gold. Those gorillas are dumping paper - not the metal. The lower the price, the faster the metal is being bought up.

[touchring]

Re: Gold looks bad

A while ago someone here talked about dumping their gold holdings as hell was coming: well maybe they will be right. Unfortunately I have had a year from hell and basically moved countries twice and been involved in endless mind games and tangles which resulted in me taking my eye off my investments: not good as my gold shares have been a disaster.

With a bit of peace at long last I can look at my investments again and take profits. I have started to sell more gold shares now as I think gold will fall to around $1,150. Gold shares look aweful I think that companies will start to hedge again soon. I will hold onto my physical as I still believe that gold will rise once this BS period is over, but this will not be until 2015.

I know that this is not a news story, but well...................hey!

I find the yield from gold shares appalling, as compared to oil and other resources. Is there a reason for it?

[lektrode]

Re: Gold looks bad

and interesting POV on the potential for a 'squeeze' any time soon? (short of a big bang)

GRG?

Why OPEC No Longer Calls the Shots


The oil embargo 40 years ago spurred an energy revolution. World production is 50% higher today than in 1973.

• By
• DANIEL YERGIN

Forty years ago, on Oct. 17, 1973, the world experienced its first "oil shock" as Arab exporters declared an embargo on shipments to Western countries. The OPEC embargo was prompted by America's military support for Israel, which was repelling a coordinated surprise attack by Arab countries that had begun on Oct. 6, the sacred Jewish holiday of Yom Kippur.

With prices quadrupling in the next few months, the oil crisis set off an upheaval in global politics and the world economy. It also challenged America's position in the world, polarized its politics at home and shook the country's confidence.

Yet the crisis meant even more because it was the birth of the modern era of energy. Although the OPEC embargo seemed to provide proof that the world was running short of oil resources, the move by Arab exporters did the opposite: It provided massive incentive to develop new oil fields outside of the Middle East—what became known as "non-OPEC," led by drilling in the North Sea and Alaska.

The Prudhoe Bay oil field was discovered in Alaska five years before the crisis. Yet opposition by environmentalists had prevented approval for a pipeline to bring the oil down from the North Slope—very much a "prequel" to the current battle over the Keystone XL pipeline. Only in the immediate aftermath of the embargo did a shaken Congress approve a pipeline that eventually added at its peak as much as two million barrels a day to the domestic supply.


© Corbis A Connecticut filling station in 1974 amid the oil embargo.

The push to find alternatives to oil boosted nuclear power and coal as secure domestic sources of electric power. The 1973 crisis spawned the modern wind and solar industries, too. By 1975, 5,000 people were flooding into Washington, D.C., for a conference on solar energy, which had been until then only "a subject for eco-freaks," as one writer noted at the time.

That same year, Congress passed the first Corporate Average Fuel Economy standards, which required auto makers to double fuel efficiency—from 13.5 miles per gallon to 27 miles per gallon—ultimately saving about two millions barrels of oil per day. (The standards were raised in 2012 to 54.5 miles per gallon by 2025). France launched a "war on energy waste," and Japan, short of resources and fearing that its economic miracle was at risk, began a drive for energy efficiency. Despite enormous growth in the U.S. economy since 1973, oil consumption today is up less than 7%.

The crisis also set the stage for the emergence of new importers that have growing weight in the global oil market. In 1973, most oil was consumed in the developed economies of North America, Western Europe and Japan—two thirds as late as 2000. But now oil consumption is flat or falling in those economies, and virtually all growth in demand is in developing economies, now better known as "emerging markets." They represent half of world oil consumption today, and their share will continue to increase. Exporting countries will increasingly reorient themselves to those markets. Last month, China overtook the U.S. as the world's largest net importer of oil.

A lasting lesson of the crisis years is the power of markets and their ability to adjust to disruptions, if government allows them to. The iconic images of the 1970s—gas lines and angry motorists—are trotted out whenever some new disruption happens. Yet those gas lines weren't the result of markets. They were the largely self-inflicted result of government interference in markets with price controls and supply allocation. Today, the oil market is much more transparent owing to the development of futures markets.

The 1970s were also years of natural-gas shortages, which turned into a bitter political issue, particularly within the Democratic Party. Many at the time attributed these shortages to geology, but they too were the result of regulation and price controls. What solved the shortages wasn't more controls but their elimination, which resulted in an oversupply that became known as the "gas bubble." Today, abundant natural gas is the default fuel for new electricity generation. The lesson is that markets and price signals can work very efficiently, and surprisingly swiftly, even in crises, if they are allowed to.

There will be future energy disruptions because there is still much political risk around oil. In 2013, the Middle East is still in turmoil, but the alignments are different. In 1973, Iran was one of America's strongest allies in the Middle East. Tehran didn't participate in the embargo and pushed oil into the market. But since the 1979 Islamic revolution, Washington and Tehran have been adversaries. Meanwhile, Saudi Arabia, which was at the center of the 1973 embargo, is now America's strongest Arab ally.

The real lesson of the shock of 1973 and the second oil shock set off by the overthrow of Iran's shah in 1979 is that they provided incentives—and imperatives—to develop new resources. Today, total world oil production is 50% greater than in 1973. Exploration in the North Sea and Alaska was only the beginning. In the early 1990s, offshore production expanded farther out into the Gulf of Mexico, opening up deep water as a new oil frontier. In the late 1990s, Canadian oil sands embarked on an era of growth that today makes them a larger source of oil than Libya before its 2011 civil war.

Most recent is the development of "tight oil," the spinoff from shale gas, which has increased U.S. oil output by more than 50% since 2008. This boom in domestic output increases energy supply, and combined with shale gas has a much wider economic impact in jobs, investment and household income. As these tight-oil supplies increase, and as the U.S. auto fleet becomes more efficient, oil imports have declined. Imports reached 60% of domestic consumption in 2005, but they are now down to 35%—the same level as in 1973.

As the U.S. imports less oil it also produces more to the benefit of energy security. There are several million barrels of oil now missing from the world oil market, owing to sanctions on Iranian oil, disappointments in Iraqi production, and disruptions to varying degrees in Libya, South Sudan, Nigeria and Yemen. The shortfall is being partly made up by Saudi Arabia, which is producing at its highest level.

But the growth in U.S. oil output has been crucial in compensating for the missing barrels. Without it, the world would be looking at higher oil prices, there would be talk of a possible new oil crisis, and no doubt Americans would once again start seeing images of those gas lines and angry motorists from 1973.

Mr. Yergin, vice chairman of IHS, is the author of "The Quest: Energy, Security, and the Remaking of the Modern World" (Penguin Press, 2012).
A version of this article appeared October 15, 2013, on page A19 in the U.S. edition of The Wall Street Journal, with the headline: Why OPEC No Longer Calls the Shots.

[GRG55]

Re: Gold looks bad

I find the yield from gold shares appalling, as compared to oil and other resources. Is there a reason for it?

Oil and other commodities are required for the human race to survive and function. Therefore a certain number of the explorers and producers of these commodities have to be reasonably well managed and make a profit.

Not so gold. The entire gold mining sector could be run by morons and idiots (some days I think it might be), and it wouldn't make a damn bit of difference to humanity at large...

[GRG55]

Re: Gold looks bad

and interesting POV on the potential for a 'squeeze' any time soon? (short of a big bang)

GRG?

Why OPEC No Longer Calls the Shots


The oil embargo 40 years ago spurred an energy revolution. World production is 50% higher today than in 1973.

Daniel Yergin's favourite phrase at his conference presentations in the middle of the last decade was "Peak Oil has peaked". And then he would launch into a presentation showing how technology has always improved to allow the finding and developing of more energy, particularly petroleum.

There is no doubt that technology is and will continue to play a role in unlocking more and more difficult (and therefore generally more and more expensive) energy and other resources to meet human population growth and demand. The price mechanism will allocate higher cost resources reasonably efficiently, and governments, with widespread popular support from most citizens, will create shortages in their well meaning but misguided attempts to introduce "fairness" to that allocation process.

[lektrode]

Re: Gold looks bad

Daniel Yergin's favourite phrase at his conference presentations in the middle of the last decade was "Peak Oil has peaked". And then he would launch into a presentation showing how technology has always improved to allow the finding and developing of more energy, particularly petroleum.

There is no doubt that technology is and will continue to play a role in unlocking more and more difficult (and therefore generally more and more expensive) energy and other resources to meet human population growth and demand. The price mechanism will allocate higher cost resources reasonably efficiently, and governments, with widespread popular support from most citizens, will create shortages in their well meaning but misguided attempts to introduce "fairness" to that allocation process.

eye hear that, GRG - esp when i think about how much oil is locked up in california, that likely wouldnt even need frakin to get at?
one can see just how popular their 'support' of US energy policy (/sarc) has become.

funnier still is how the anti-everything crowd still thinks its 'big oil' thats out to get us - or how after accepting the billions to build - then shutdown before it opens - a nuke dump in nevada, prince harry&co's side of the aisle still thinks theres any alternative that will 'free us' from imported energy

[bpwoods]

Re: Gold looks bad

There is no doubt that technology is and will continue to play a role in unlocking more and more difficult (and therefore generally more and more expensive) energy and other resources to meet human population growth and demand. The price mechanism will allocate higher cost resources reasonably efficiently ...

GRG55, no offense, but do you really and truly hold such a view, opinion, belief, or whatever? Its a tad naive - to say the least. But there you go, as they say. However, your last bit about govs is correct.

This thread was about Gold. There is another one just opened. If you hold physical: Hold it!

[lektrode]

Re: Gold looks bad

....This thread was about Gold. There is another one just opened. If you hold physical: Hold it!

+1, BP - as i am.
but, no offense/all respect...
if Mr J's theory of GAGFO is relevant - then isnt whats happnin with the black kind also pertinent to the price of the yellow kind?

and GRG's observations on this topic ARE as valuable as Mr J's, IMHO sir.

[bpwoods]

Re: Gold looks bad

[QUOTE
if Mr J's theory of GAGFO is relevant - then isn't what's happening with the black kind also pertinent to the price of the yellow kind? [/QUOTE]

Yes. Black up => Yellow up - in terms of the energy cost to extract and process. The 'value' folk attach to gold is another matter entirely. This will be decided by the faith folk put in their fiat currencies. But there is a limit here. I may not be able to use my gold coins to pay my taxes, but I may be able to exchange them for a legal tender note - provided that sort of economic exchange is not proscribed - and it very well might! Caveat!

... and GRG's observations on this topic ARE as valuable as Mr J's, IMHO sir.

Indeed they are! I was just somewhat taken aback at their firm tone. I believe my own view, opinion, belief or whatever, is different. Some other time, as they say!

[lektrode]

Re: Gold looks bad

.....Indeed they are! I was just somewhat taken aback at their firm tone. I believe my own view, opinion, belief or whatever, is different. Some other time, as they say!

and eye look forward to seeing these, too! bp.
but its good, again IMHO - that we have those who WILL give us a 'firm tone', mightnt you agree -
vs those who dont seem to have much of an opinion, about much of anything these daze?
when, in my most humble opinion, that type seems to be causing most of the problems (as evidenced by outcomes of recent elections, both this side of the pond and that) who apparently dont/wont 'stand for something and then fall for anything' as the song goes:



(scuse the ad, couldnt find a vers w/o)

[coolhand]

Re: Gold looks bad

Quoted gold prices are like a coat check room at a nice hotel. Imagine over time it develops that there are 60-100 coat check tickets for every coat in the coat room. If the insiders that ran the coat room suddenly realized that the value of coats was much greater than the quoted price [say for example, they begin to realize the coats are used to settle a rising % of global trade at an implied price significantly higher than today’s price? J ], what should happen? The supply of physical coats should fall & the “price” of coat check tickets should fall as well as insiders realize that with 60-100x leverage, 59-99% of the coat check tickets are actually WORTHLESS because there aren’t coats to back them.

Think about the bank run on George Bailey’s bank in ‘It’s a Wonderful Life.’ How many people get 100% of their deposit claim checks? Only one, right? Everyone else that wants immediate access to their claim check takes a BIG haircut to ‘face value’ of that claim. What you are watching in gold markets is a slow-motion version of a classic bank run on a highly-levered depository.

[bpwoods]

Re: Gold looks bad

that we have those who WILL give us a 'firm tone', might'nt you agree -

Yes indeed. Everyone HAS a 'view' - at least I hope so, and I would also expect them (at some appropriate moment) to express it, and if possible, to offer some plausible explanations as to how they came by that 'view'. Presumably it did not come out of a Christmas Cracker! Difference is good - but, ...

Jesse, over on his Crossroads Cafe blog has an interesting comment on this matter - of personal responsibility. Its very well crafted.

[lektrode]

Re: Gold looks bad

Yes indeed. .....Difference is good - but, ...

Jesse, over on his Crossroads Cafe blog has an interesting comment on this matter - of personal responsibility. Its very well crafted.

well - are ya gonna keep us in suspense here, bp?
;)
its considered a courtesy round these parts to pop in a href/re-direct at these kind of 'crossroads' ?

[bpwoods]

Re: Gold looks bad

Apologies: http://jessescrossroadscafe.blogspot...-go-wrong.html.

Bit distracted. Watching the 'Adjustment Bureau'. Cool stuff!