Merry And Bright

Well, not so much gold and crude. Pricing continues under pressure for those two leading commodities and the end of the downward push is nowhere in sight.

Oil is a bit more complex than gold, but here is the short version on today’s slide. Supplies are building. No major producer has cut production and it is going into storage. They’re doing this in hopes that prices will turn around. The perverse effect is that such tactics only drive the price down lower. As you probably well know, this is a tactic that other commodity producers use when prices are low. Coffee is notorious for that game play. You probably also know that eventually it catches up with the commodity in question. A glut is a glut is a glut.

Gold, of course, has an assigned value, more or less agreed upon in the marketplace by traders and investors. It moves in relation to money; equities and outside markets such as oil. The relationships are clear. How those relationships move mechanically is not always clear.

Fundamentally at the moment we have some clear signals that do not look bullish. The U.S. economy is bellowing and snarling, a pent-up beast finally unleashed. So, a need for safe haven is out of the question. Crude keeps dragging gold with it. Unless consumption somehow ramps up and production is ratcheted down, there is no good reason why the price should rise anytime soon. And if oil rises, it won’t rise much.

Some analysts and think-tankers are saying that the Saudis and a few of their cohorts in league with the United States are keeping prices as low as possible to hurt ISIL/ISIA and to punish the Russians and other pro-Assad forces in Syria. It’s a sort of win-win for the forces of stability at any price.

Just as an aside, the Saudis have about $1.4 trillion in reserves. They could stop producing oil tomorrow and have 10-years worth of money in the bank.

Let’s be reminded that volatility is our main watchword in the holiday season. Today has been extraordinarily quiet, as will be Friday and much of next week.

Wishing you as always, good trading, and to all a good night,