Gold takes care of itself, or to be more accurate, the governments of the world are all working in concert to see gold fly the moon in due time.
Oil is time frame dependent. Here the the US, we focus upon our own economic downturn as if that were the only factor. Yes, we're using about 2% less than we were this time last year, and that's good. But....
i) Oil production in the US has been declining at a rate of about 9.5% per year. Estimates are that if we were to spend upwards of half a trillion dollars annually on exploration access and production of new sources domestically, then we might be able to reduce the amount of that decline to about 4.5%.
ii) We import about 85% of the oil that we use annually. About 15% of our imports come from Mexico. Mexico has seen their oil fields experience an annual decline rate of about 11% per year. Put that together, and it it highly likely that Mexico will stop being a net exporter of oil sometime in 2010. Since they derive about 40% of their national income from payments on their oil exports, expect Mexico as a country to become one very unhappy place when that happens. Good thing we have an open border in case civil unrest occurs, and we can offer safe haven and refuge for streaming masses of people fleeing the collapse of their country.
iii) The Saudis have in the past volunteered to ramp up production in times of world distress, and of course lower production when they wish a higher price. Their actual output numbers tell a different story, namely that they no longer have the ability to increase production to any meaningful amount. Their fields too are in noticeable annual decline.
iv) Chavez in Venezuela is currently sitting atop nationalized oil machinery that his own technician's can't operate correctly. When properly run, the oil he obtains costs him about $85 per barrel to extract. That's something of a nicety at the moment, as much of the hired help has deserted him as a consequence of him not paying his bills.
v) India alone has more children in it than the US has people. Imagine every one of them growing up and obtaining a car. :: blink :: Then think about the most populous country in the world, China, doing such a thing on an even more massive scale. Makes that 2% less consumption here in the US look sort of, well, meaningless, doesn't it?
All of these are positives for oil. And all will play out over the long term.
In the near term, it is worth noting that having the price of oil low helps the US and its citizens weather an economic downturn. It also kicks those nasty oil producing countries right in the wobblies (Middle East, Venezuela, Russia). Makes one almost marvel at the fortuitous circumstance that places much of the price setting mechanism for oil directly under the control of our US commodities markets.
Good thing those are not capable of wrongdoing or manipulation, or people of the world might start accusing the US of conveniently manipulating the oil price down when it most benefits them....
Would be nice if oil had a bit of a run up. As for gold "dropping", I'm not quite seeing that on the spot chart. Wobbling less than a percent isn't really much of a tell for gold, and since gold is currently at all time record highs in all currencies but the US$, it stands to reason that market opens across the world will at first be greeted by a bit of profit taking.
Don't mean to be mean; I'm a bit of a gold bug and just happen to think that it has (finally) started decoupling from both the US$ and oil. Sort of starting to assume the role of a global currency, one that *can't* be inflated by spend crazy governments...
I agree with you Dan. I think that gold may be due for a slight technical pullback, but I don't see it collapsing big time - there are too many factors going for it. In addition, if there is an expectation of the dollar falling (which I agree will happen),then any pullback in gold will be moderated in the short term and buoyed by the falling dollar. Ultimately, I think gold will continue its upward climb to 1500 this year.