Financial Sense Blog

While growth in the U.S. has flat lined, per capita consumption in Asia and the emerging world has powered ahead. Does this mean a shift in global oil dynamics?

Orders of durable goods fell 3.6% in April, marking the second monthly decline in the last three months. Orders of durable goods and shipments for prior months include benchmark revisions. Orders of durable goods in March have been revised up to show a 4.4% gain vs. the earlier estimate of a 2.5% increase.

U.S. Dollar and gold prices rose to a three-week high of $1528 an ounce Wednesday morning London time, while commodity markets – like global stock markets – failed to add significantly to the gains they made Tuesday after Goldman Sachs issued a bullish note on the sector.

Tuesday's headlines from the popular press all seemed to highlight the Dow's third straight daily decline. Such an event has only happened a few times so far this year, so it wasn't surprising to see the loss, modest as it was, in the headlines.

Soft money works. Just ask the Swiss central bank... Time was, the past was another country, as L.P.Hartley wrote in The Go-Between . Because "they do things differently there."

Numerous commentaries in the media, both on television and in print, would have us believe that gold is a bad investment. Headlines warning investors to avoid the yellow metal are commonplace. Examples such as “Five reasons not to own gold”, “Gold is in a bubble”, “Gold as an investment - think again”, “Gold is a bad hedge”, “Gold is a pointless rock,” and “Why gold is a bad investment” can be found with a simple Google search on gold and investment.

If I was to cast 2011 someway, it would be a disaster; it would be natural disasters of unprecedented magnitude, combined with a collapsing Mid-East order, the Euro in some big trouble and gold and USD rallying together.

Gold has rebounded to 3-week highs above 1526.43 on safe-haven flows. With nearly 61.8% of the recent correction now retraced, it's looking increasingly like the debt woes in both Europe and the US have prompted the dominant uptrend in the gold market to re-exert itself.

What a year it has been for oil. After climbing almost steadily for 11 months, the start of May brought about a significant correction that pulled prices down some 15%, including a single-day $10 loss on May 5. What happened? The froth came out of the market.

In 2008, and again now in 2011, Congress has been looking for a Bogeymen to blame for a rise in oil prices. Since the rise in oil prices almost certainly has to do with factors outside their control – such as rising demand in developing markets and constraints in cheap supplies – they must frantically search for something in their control such as people to blame. Such is the life of a politician. One of the Bogeymen they have zeroed in on is the commodity speculator, a term not well defined but probably meaning any bank, mutual fund, hedge fund, or financial firm that buys or sells commodity futures, derivatives, and swaps, and perhaps also includes people who buy ETFs such as USO (oil), UNG (natural gas), or DJP (commodities). They cast a wide net, but it is into a barren sea, for the case against commodity speculators is deeply flawed. My hope is that this article presents an alternative view into the role of commodity speculators and helps end the misplaced focus thereon for rising oil prices. As this is only one of several important financial issues where honesty will set us free, we need leaders who are willing to level with the American public about economic truths in the place of demagoguery and witch-hunting.