Commodities prices plunge: The drawback of basing investment advice on the weather forecast
Today's Financial News - Posted September 2, 2008
As Hurricane Gustav fizzled, commodities prices have plunged… if gold, crude oil, and copper are moving with the weather forecast, it’s time to head for the relative safe haven of stocks!
by J. Christoph Amberger
Baltimore — (TFN): “For now, based on our analysis, gold’s bull market remains in force,” wrote the Aden Sisters on August 27: “That’s the bottom line. Even though there have been some wild swings, the major trend is still up and as long as that’s the case, we recommend holding your positions.”
I was rifling through the daily e-letters of my other gold bug colleagues for further confirmation of the “unbroken up-trend in gold”. But they were full of gripes about how Labor Day is a frivolous holiday… that the American media gorged on Governor Palin’s imminent grandparenthood… and that Americans are getting poorer. Not a word that gold hoarders, too, just saw their net worth plummet by $30 bucks for every ounce they squirreled away.
Gold careened through the $800 support line today, to $790 as I’m writing. The dollar, that currency of sneering disdain, rallied against the other major currencies. Other commodities — “hard assets” in gold bug speak — also tanked. The S&P GSCI index of 24 commodity futures had dropped as much as 7 percent in two days. Oil prices fell below $106 a barrel Tuesday in Asia, and Brent Oil spot prices now are at $103 and falling fast.
And to think, just last Friday, there was this nice stabilization in commodities prices that seemed to confirm the bullish predictions of the hard asset crowd. Unfortunately, they evaporated alongside with the threat of Hurricane Gustav wreaking havoc with oil production in the Gulf of Mexico. And that’s the rub: Last week’s move once again proved that gold, oil, and other select commodities are indeed just that: Speculative commodities.
And if your main argument for a particular asset is that a natural catastrophe might put a dent into supplies, you might as well punt on your local weather forecast.
But here’s my prediction: Undeterred, our gold bug friends will be advising their readers to use this “last opportunity” to buy gold below $1,000. (It’s the equivalent of the Internet bubble blowers exhorting their lemmings to “accumulate” stocks in Pets.com back in April of 2000.)
My challenge: Help me keep track of these predictions! If you see them, could you cut and paste them, with author byline and date, into the Comment field below?
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