Sunday, August 10, 2008
Do you want to go to London?
In early June I predicted that by mid summer we would see crude oil at about $100 a barrel and Gold around $850. As of Sunday, August 10, we are almost half way through the summer and both oil and gold are within $15 dollar of my target price. I still have 11 days to go and I might just hit the target.
We could see a spike up even greater than the one that occurred over the last few weeks as traders scramble to cover their short position and go long. Many of you may be asking yourself why the strong recovery in the dollar? The markets were expecting the Fed to increase interest rates and with the payroll decline there was no way the Fed can increase rates. On the surface it would appear that this lack of movement by the Fed would have caused the dollar to decline. The reverse happened and the dollar strengthened. Why?
The other issue for me about the dollar is the decline in some stock prices in the second half of 2008. As the dollar declined those companies who were multinational in nature saw earnings increase because of exchange rates. With the dollar falling against the euro companies that got paid in euros and then converted the earnings back into dollars had inflated earnings. I expect that with the current strength of the dollar we will see third quarter earnings affected by the increase in the value of the dollar.
This may well be the beginning of a significant reversal in trend that takes the pound to $1.75, the Euro to 125 and the Yen to 125. I did pretty good predicting the price of oil, gold and the dollar.Lets see what happens. Perhaps it is time to begin to make travel plans to England and Europe.