Oil Nearing Low Tide, Gold Rises

West Texas Intermediate crude oil fell below $46 per barrel today and it scared the pants off equities traders, who now see the plummeting price as a barrier to profits in the sector. Energy stocks account for about 13% of the old-line stock exchanges.

Gold, no longer trading in even quiet conjunction with crude, took off today and is trading at its highest since late October. A word to the wise, however…

A growing chorus of analysts is beginning to say that oil is nearing its bottom. That would mean a turnaround for stocks, and a downturn for gold. How close is the bottom for oil? Maybe a month or two. And the uptick we expect to see in oil will not soon bring it to near the old $100 per barrel floor we are used to seeing.

Elsewhere, while it is not a major factor, the current terrorist crisis did help gold today. A stronger influence could be felt if the western powers decide to commit troops and a larger naval and air presence in the Syrian/ISIL civil war or, even more likely, to Yemen. (While to all outward appearances it seems like the Obama administration made a diplomatic faux pas by not attending the solidarity rally in Paris on Sunday, one of our sources in Washington says that something big is being planned and high admin officials simply couldn’t spare the time.) That sort of warning or worry helps drive the price of gold.

The dollar was stronger today, although it was not enough of a counterweight to slow gold prices down much.

The continuing speculation as to whether the Fed will raise rates “soon” rages on. we now have to factor in the EU’s plan to cut rates, add paper buybacks to its portfolio or do both. An interest rate cut would do little, one way or another. It could be tough on gold prices because more money would flow into U.S. dollar investments. But the spread, even with a cut in European rates, will still be small. A combination of a euro zone interest rate cut and a Fed interest-rate rise would undoubtedly dent gold prices.

Let’s also be pessimistic for a moment and say this: we haven’t heard the last from Putin.

Wishing you as always, good trading,