Sunday, 20 July 2008

George Soros Buying Gold

Considering the extent of the oil price decline, gold has remained very resilient as we predicted. Big money interests realize that the long term gold/ oil ratio favours higher gold prices and or lower oil prices. Forbes reported that George Soros has gone long gold and short oil. ( The articles states the ratio is 10 to 1 when in fact it is 15 to 1 which would see a gold price at 15 times the price of oil.

Were oil to fall further that could see oil at some $120 a barrel and gold at some $1,800 per ounce which seems extremely likely given the level of macroeconomic and systemic risk - unprecedented in modern financial and economic history.

With the financial crisis still unfolding in the US and Europe putting money on gold is a good way of preserving your wealth IF things get really bad. If the US Dollar keeps falling as their economy continues to come apart, the big money will go to safer havens. Gold is one such place.

As for the price of oil; it seems reasonable that excessively high prices will be cut down by government legislation in order to protect the economy. Manipulating oil prices down is a good way of helping struggling economies.

[Posted at the SpookyWeather blog, July 20th, 2008.]

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