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What’s Bugging Gold Bugs?

Posted on Friday, May 30th, 2008 | In Current Market News, Gold Markets, Stocks to Watch
Contributed by: Jack Crooks (http://blogs.moneyandmarkets.com/blog/currency-corner) -

What’s Bugging Gold Bugs?
I’m beginning to wonder if some of the gold bugs are starting to switch to the dark side (crude oil). Why?
Well, gold and crude oil have been very closely correlated on many occasions – mostly due to the long-term dollar bear market. Except right now, amidst surging oil prices (seems like a new record everyday), gold prices are just muddling around with a downward tilt. You know the gold bugs can’t be happy watching things play out this way.
The thing is, the supply and demand dynamic just isn’t as powerful for gold as it is for oil — thus warranting less speculation on gold and greater speculation on oil. Additionally, as investors have come to accept the current rag-tag condition of financial markets, it seems some of gold’s safe haven appeal has receded.
And we think that’s exactly what the chart is telling us …
This period of lower highs and lower lows after touching an all-time high of roughly $1,043 an ounce doesn’t bode well for gold. Of course, this could be only a correction after a quick surge to record levels. But this tells us the downside, or the correction, has further to go.
And below is a daily chart showing that the cost of oil per ounces of gold. Oil has been rising steadily relative to gold since the Bear Stearns bailout in mid-March. This is why we believe gold may have lost some of its safe-haven luster.

Now we watch the relative behavior of crude and the dollar!
Regards,
Black Swan Capital

Last 5 posts by Jack Crooks





About Jack Crooks (http://blogs.moneyandmarkets.com/blog/currency-corner)

John (Jack) Crooks is the founder and president of Black Swan Capital, an independent advisory firm specializing in foreign exchange and currency markets investing for retail and institutional clients. A seasoned financial advisory with nearly 20 years of investment experience, Mr. Crooks uses both quantitative and qualitative approaches to determine the fundamental driving force(s) behind the movement of the currency, capital, and commodities markets. He is the editor of Weiss Research’s latest investment offerings, World Currency Alert and World Currency Options, which were launched in August 2007.

Mr. Crooks also founded Ross International Asset Management, a discretionary money management firm specializing in global stock, bond, and currency asset management for retail clients. Previously, he was general manager of Plexus Trading, where he specialized in currency futures and commodities trading. During his successful career, Mr. Crooks served as chief currency and futures strategist of M2 Futures Inc., an investment boutique headquartered in Chicago, as well as vice president of Global Strategic Research for an international investment boutique, where he was responsible for providing daily advice and global strategy analysis.

Prior to entering the investment arena, Mr. Crooks held various corporate finance positions. He has written extensively on the subject of global currencies and international economics and has been published in Asian Times, Futures Magazine, Barron’s, Bloomberg, Dow Jones Newswire, and across many financial websites. He has also appeared on Bloomberg TV and CNBC.

Mr. Crooks holds a bachelor’s degree in finance from Florida State University and a master’s in business administration from the University of North Texas.

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