Crude Oil Struggling - Deflation Warning Signal?

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ashvinp's picture
ashvinp
Status: Gold Member (Offline)
Joined: Jan 21 2010
Posts: 412
Crude Oil Struggling - Deflation Warning Signal?

While equities, bonds and many commodities are benefiting from the massive liquidity injections from the US and EU, it seems crude oil is the only thing that can't break higher. CNBC said oil went down today on news that inventories were more than expected, so we can probably discard that explanation. Even as the gulf oil spill remains an ecological disaster, efforts to cap the leaks fail, the summer travel season begins and the global economy is "recovering", oil prices stay relatively low.

This to me is a clear sign of how fragile the real productive economy is and how manipulated the various indicators are (retail sales, unemployment, housing indices, etc.). Robert Prechter's claim that there has been a fundamental shift in mood from optimism to pessimism about the economy seems to be vindicated, and all other indicators are lagging energy prices. He has been wrong about his short term predictions about gold, but I think this is because he failed to anticipate the acceleration of sovereign debt concerns in Europe and the implications for monetary safe havens.

Any thoughts about this?

timeandtide's picture
timeandtide
Status: Bronze Member (Offline)
Joined: Apr 3 2010
Posts: 67
Re: Crude Oil Struggling - Deflation Warning Signal?

I think Robert Prechter will be proven correct about Gold - that it will follow the other markets down as the deflation progresses. It will be liquidated like everything else in a desperate scramble for cash to pay off debt - in particular sovereign debt. The largest holders of gold are, in fact, sovereign nations and they will eventually liquidate just like everyone else.How far down gold goes is a tricky question and will be best answered by the chart. I would be very surprised if it did not enter the previous wave four area in the $600-$650 area.

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