The Cause

Falling Oil prices and a weakening Euro have been "headlined" as the main cause of the "crash" in Gold and Silver prices. Though certainly both have contributed to the mass exodus from the Precious Metals, their desired effect on Gold and Silver would not have been as overwhelmingly successful were it not for the concurrent fall in the Yen. The whole stew smells of a massive currency intervention intended to piggyback the fall in Oil prices.

Oil prices became clearly overbought at 124 in early March. As traders tried to short the "top" in Oil, they were squeezed by those that believed the Goldman Sachs Oil 150 call. It would be safe to say that the final $25 in the recent run up in Oil was the result of a long short squeeze, and not "speculators" in the futures markets as the government would have you believe. RSI Bearish Divergence exposes the lack of "real" buying in Oil as prices surpassed 124. Had this been real buying, RSI would have printed a higher high as prices hit 147.90. This "peak" in Oil prices happened to coincide with the seasonal "lull" in Oil prices that occurs annually in July and August. The media would have you believe that Oil prices have crashed because of "demand destruction" going forward because of a slowing world economy. I suggest that nothing could be further from the truth. Oil prices have certainly been helped lower by the rising Dollar, and I would suggest that this currency intervention was timed to coincide with the seasonal drop in Oil prices to give the "perception" that the "Oil Bubble Has Burst" and the threat of Inflation was destroyed with it. Again, I suggest that nothing could be further from the truth. Oil prices have pure and simply reacted "technically" to a severe overbought condition that has brought Oil back to it's trendline prior to it's next explosive run up. The rise in the Dollar has only acted to speed up Oil's decline back to it's trendline. Demand Destruction IS NOT the cause of the recent correction in Oil prices. As you can see clearly on the chart, Oil prices corrected back to the trendline last July and August, and again in February of this year. BOTH pullbacks offered excellent and profitable buy opportunities not only in Oil, but in Gold and Silver as well. Today's return to the trendline should result in the same profitable buy opportunity.

The Plunge Protection Team has orchestrated a "perfect storm" falling Oil prices and currency intervention in an effort to hammer Gold and Silver prices in an effort to "diminish" the Inflation fears that threaten the destruction of the bond market. And it is the bond market that the Fed is most keen to protect. Nothing will destroy the bond market quicker that rampant inflation fears. It should never be forgotten that the bond market dwarfs all other markets, and it is the bond market that is the backbone of our credit based financial system. If the bond market falls, the entire financial system goes up in smoke...and Gold and Silver go to the outer reaches of the universe.

Currency intervention has NEVER succeeded in the long term, and never will. Currency intervention can buy time for those behind the intervention, but it can never reverse the course of a falling currency. Recall that on July 13 Hanky Panky Paulson sought relief from Congress for Fannie Mae and Freddie Mac. On July 15 the Dollar closed at 71.79...it has been higher ever since. How could this happen without the aid of joint currency intervention by global Central banks? The Dollar should still be going down following the call for the Twin Mortgage bailout.

The crushing fall in Gold and Silver prices are a gift from the clowns running the US economy. Many of us who have lost thousands in the carnage due to margin calls may not feel so gifted today, but those who get back on the horse will feel enriched by the time Christmas rolls around. We have all invested and/or speculated in Gold and Silver for the soundest of Fundamental reasons too numerous to count here. We all know what they are. The criminals have stolen billions in Gold and Silver from us for one simple reason: They want our Gold and Silver because they know better than any of us the fundamentals surrounding these Precious Metals, and they intend to profit from their rise to "infinity and beyond" and they'll make every effort to see to it that they are the ONLY beneficiaries of the coming explosion in the prices of the Precious Metals.

Tomorrow: The Effect

Deception By Design

Feeling raped, robbed, ripped off? Join the club. Don't blame your broker, don't blame yourself, don't blame your trading plan. My sympathies to one and all "forced" to take a hit Friday. We're all in the same boat. The ship is still afloat, but man what a broadside. If you've received a margin call, SELL down to cover as much of your call as possible, and still maintain a position. Live to fight another day. You can't fight back if you leave the ring. I've been down this lonely road myself. It is one of the bitterest of pills to swallow. Recovery is possible...one trade at a time.

Many of us here have experienced this all before. One year ago this month, a dramatic whoosh in the Precious Metals similar to Friday's, pushed us to the edge of the ring. Had we walked away at that time, we would have missed one of the most magnificent up legs in this secular Bull Market to date. This is why you must salvage a position, any position, from this carnage so that you may get back that which has been stolen from you.

The Financial System is in much more perilous disarray today than it was in August 2007. If Friday's "nonsense" proved anything beyond a doubt, it is that the economic slowdown that has a firm grip on the US has now spread across the globe. It seems absurd that the currency markets would dump all in favor of the Dollar...and it is. Particularly in light of the fact that it is the Dollar that is the cause of the global economic meltdown.

Fundamentally the Dollar is in exponentially worse shape today than it was just one month ago, yet alone one year ago. It is an undeniable fact that the US Dollar is fundamentally dead in the water, a Baby Ruth in the swimming pool. Nothing miraculously changed fundamentally Friday to raise the Dollar from the dead. If anything, economic data out Friday, not to mention the Fannie Mae earnings miss by a factor of four, left the Dollar fundamentally worse off than it was just one day earlier. Unfortunately economic data out of Euroland the past week has been overwhelmingly weak and has put severe pressure on the Euro. This, strange as it may seem, has lead forex traders to seek refuge in the Dollar. How the Dollar continues to be deemed a "safe haven" over Gold escapes me too, but it is what it is because, for now, the Dollar is still rgarded as the World's reserve currency.

The US Dollar a safe haven? You have got to be joking. Of course I'm joking, but recent subtle events have given the "perception" to forex traders that the Dollar is the place to run and hide. Now that makes about as much sense as running into an ammo dump during an air raid, but unless the building is immediately hit by a bomb, you're going to feel safe in there until you think of a better place to go. In other words, it's unlikely forex traders are going to stay under cover of the Dollar for very long. It's a dangerous place to stay.

As we noted last week, the dollar had run up against its falling 200 day moving average. In most technical instances, this would have been quite a wall for the market to overcome. But on Thursday, ECB President Mr. Trichet backed off his recent hawkish stance supporting higher interest rates for the Euro, and took a seat on the proverbial fence by telegraphing that interest rates in Euroland were going to remain steady for the time being. He recognizes now the same peril that Bumbling Ben at the Fed faces: rising interest rates can kill economies. Of course this was instantly interpreted by forex traders that the "next" move by the ECB would be to cut interest rates. Now Mr. Trichet never said he was going to cut interest rates, the forex traders just figure that eventually he will. It remains to be seen if and/or when just such a rate cut would occur, but given the ECB mandate to control inflation, and the fact that they just raised interest rates one month ago, it seems unlikely a rate cut in Euroland is imminent.

But, perceptions being what they are, forex traders decided to dump the Euro. I find it a bit confounding that the Europeans did not turn to Gold as their currency tanked, and instead ran to the Baby Ruth floating in the swimming pool. But to the pool they dashed. This mad dash to the Dollar catapulted it over the 200 day moving average and a major short squeeze in the Dollar ensued. As the Dollar rose, Oil fell further in complete ignorance of the threat to the Turkish pipeline carrying Oil out of the Caspian region where the Russians are engaged militarily with their Georgian neighbors. As Oil fell, Gold continued it's unjustified decent in the naive belief that falling Oil prices will rid the world of Inflation. As Oil and Gold fell, Silver was not only kicked to the curb, but down the street and into the sewer. Collapsing Silver prices set off a cascade of margin calls that only exacerbated the decline.

Amazing, one guy opens his mouth and a major short squeeze develops in the Dollar putting heavy pressure on Oil, which is felt by Gold, and leaves Silver investors on life support. And NOTHING fundamental with regards to the on going systemic failure of the World's Financial System has changed for the better, only gotten worse. Surprising? Not really. Just one step closer to financial Armageddon imo.

As always, the International Forcaster Bob Chapman can sum things up best. I give the last words this evening to him.

US MARKETS
In what can only be described as the most obnoxious market manipulations of all time, the elitists have pulled out all the stops to give the stock markets their final "hurrah", while simultaneously producing the greatest precious metals and resource share bargains you could have possibly hoped for. Let 8/8/08 stand as a testament to the unmitigated gall and flagrant manipulation of markets by the President's Working Group on Financial Markets, known as the PPT, whose existence and 24/7 illegal intervention in every market on the planet, though unacknowledged by the Fed and our government, has now been confirmed beyond any reasonable doubt. Let history show that the blatant cheating and insider trading made possible by Reagan's Executive Order 12631, issued 3/18/88, which has now been pushed to the outer limits of market tolerance, stand as a testimony against the current Administration when the testimony from the trials and recriminations is adduced during the Very Large Depression to come, as an outraged America seeks vengeance for the financial thievery, devastation and deceitfulness wrought by the Illuminati's perpetration of the greatest financial criminality in the history of mankind.

How else can you describe a 1.285 rise in the USDX leading contract in one day from 74.725 to 76.010? How else do you describe gold and silver lease rates which have gone from already ridiculous levels that were a little above or below zero percent to massively negative rates of minus 2.3% to minus 3% in one day for all gold and silver lease rates regardless of the length of term? How do you describe an almost $5 per barrel decrease in the price of oil on the same day as all these other manipulations occurred, while the Dow climbs over 300 points in the face of losses from both Fannie and Freddie, which account for more than 50% of all residential mortgages in the US, that are triple the market's expectations? And was not gold $120 an ounce higher, and silver almost $4 an ounce higher, only 3 weeks ago? What has changed all of a sudden? Are we to believe that the price of oil is the be all and end all to financial markets? Is not oil still way north of $100 per barrel? Is there not a worsening credit crunch? Is there not a rapidly declining real estate market transpiring as we write this article, evidencing a decline, which shows no end in sight? Is not unemployment, even officially, at extremely high levels? Is not M3 still in the 16% to 18% range, thus continuing to lock in hyperinflation for years to come? Is not inflation running rampant worldwide? Is not US consumer spending experiencing negative growth when inflation is factored in? Are not corporate earnings abysmal? Are we not in a recession? Are losses from financial institutions in the trillions of dollars still not being hidden from sight by use of bogus "creative accounting" methods blessed by our corrupt regulators? Is there not a war in progress in the Georgian province of South Ossetia that could break out into World War IV, while the potential for hostilities around the world remain extremely high? We recoil in disgust at the heavy-handed manipulations being wrought by the Illuminist cartel to save the traitorous incumbents in Congress from getting a firm boot applied to their derrieres in November.

Why should gold go down if the dollar goes up? If the dollar goes up substantially, that means the euro is going down substantially, so gold should be exploding in the Euro Zone. If anything, a weaker euro should be more supportive of gold than a weaker dollar as there are just as many euros out there as there are dollars now, and because the people of Europe are far more attuned to the uses and purposes of precious metals than are their US counterparts. We sure hope the people in the Euro Zone loaded up on precious metals, which are now skyrocketing in their currency as the euro has gone from 1.60 dollars to 1.50 dollars in rather rapid succession. All fiat currencies will continue to lose against gold, including the dollar, so it is time to load up on the bargains you have been so graciously gifted with by your evil government and the Wall Street fraudsters!!! The Euro Zone is now in recession, and the ECB has just joined the Fed in a state of sublime irrelevancy and impotency as they now occupy the same box that the Fed is in and cannot get out of.
http://news.goldseek.com/InternationalForecaster/1218390400.php

Fed Powerless To Stop Rise in Gold

Fed Shift Indicates Main Rate Will Stay at 2% to Revive Economy
Aug. 6 (Bloomberg) -- Federal Reserve policy makers indicated that interest rates won't budge until next year as they wait for the credit crisis to abate and inflation to ease.

The central bank, which left its benchmark rate at 2 percent yesterday, said ``downside risks to growth remain,'' dropping a reference in June's statement to ``diminished'' dangers. The Fed also said price increases are of ``significant concern.''
http://www.bloomberg.com/apps/news?pid=20601103&sid=aLdR6qgl08_o&refer=us

They're going to have a long wait...

The euphoria on Wall Street then obviously revolves around the Fed standing pat on VERY low interest rates. Ask any economist how we got into the present financial crisis and to a man/woman they will tell you that Greenspan left interest rates too low [1%] for far too long. And so now, here we are stuck down at 2% for at least the next 2-3 quarters.

"Hey, let's fix the problem by recreating what caused the problem in the first place!"

"Brilliant!"

But what about Bumbling Ben's hard line "support" of the US Dollar several weeks ago? LOL! Can you believe people actually believed that hot air? You're damn right downside risks to growth remain, and they are colossal. Diminished dangers to growth, can you say Ben looks like a jackass now? C'mon, it's easy...

"BEN LOOKS LIKE A JACKASS NOW!"

Very good.

Now consider this. The feeble "rally" in the Dollar over the past four months has been recently "sustained" by the belief that the Fed would soon be raising interest rates. Well, now that that is isn't going to be happening, I'd suggest this pathetic Dollar rally is about to hit a wall. The Dollar Index ran into its falling 200 day moving average today. If you've got Dollars you've been wanting to dump, now may be the best opportunity you'll have for a long time.

Then consider this. The weakness in Gold the past four months has been recently "sustained" by the belief that the Fed would soon be raising interest rates. That speculation has now been clearly blown out of the water. It would stand to reason then that with the speculation of the Fed raising interest rates to support the Dollar now destroyed, Gold should be free to resume it's march back to $1000, and on to 'infinity and beyond'.

The Fed clearly has chosen to accept inflation at this time, as their ONLY tool to put up a fight against it is via increased interest rates. Clearly they now understand that raising interest rates at this time is all but impossible, but not necessarily for the reasons you might suspect. Sure, raising rates now would most certainly crush the economy, but let's not forget for even a moment that the Fed has promised to loan money "indefinitely" in a lame effort to give the appearance that the banking industry is "sound". Raising short money rates would definitely increase that plans cost to the beggar banks. The Fed cannot raise rates. Too bad for them, too bad for the Dollar, and too bad for the fight against Inflation. Gold is right where the Big Money wants it...cheap.

Tomorrow it is quite likely that Mr. Trichet will comment on slowing growth in Euroland, but remain steadfast in his vigilant fight against inflation. There should be no doubt that he has NO plans at this time to lower interest rates in Euroland. This should help the Euro regain it's footing and throw pressure back on the Dollar. The Dollar has nowhere to go but down, there is absolutely no fundamental basis that supports a move higher.

To be honest, it is obvious that even the most recent strength in the Dollar is less about economic data here at home being "better than expected", and more about weak economic data in Euroland. Growth may slow in Euroland, and they may be heading for a recession there, but the United States IS in a recession right now. Interest rates adjusted for inflation are NEGATIVE. The reasons to own Gold and Silver are too many to count. I have given you countless reasons to own Gold and Silver over the past four months. They all remain valid.

It is interesting to note that Gold had violent upside moves preceding BOTH the Bear Stearns bailout AND the Fannie/Freddie bailout. Both of these moves higher in Gold and Silver were supported by the fear of an imminent collapse of the financial system. Both moves took Gold into the vicinity of $1000. One just over it, the other just under it. Gold reacted to the potential for economic catastrophe just as it should. I point this out because the Inflation angle that supports moves higher in Gold, and Silver, has so far been fairly insignificant. Yes Gold and Silver have risen since 2001 as the US Dollar has fallen, but the investment class has really failed to jump the train as an Inflation hedge. This "investment" factor is what we are patiently waiting for to launch Gold over the $1000 hump. It's out there, it's lurking, and with Gold now flirting with it's 200 day and 50 week moving averages, savvy investors looking to protect their wealth will begin to trickle out of the woodwork and put a floor under the Gold Market. Couple these investors with the physical buyers in India as fall approaches, and we could soon see that astonishing rise in the Gold price we have so patiently been waiting for.

A Toilet Exploded On Wall Street Today

I have to be brief this evening, but I cannot let this load of crap pass by without comment.

Wall Street extends rally after Fed decision
NEW YORK (AP) -- An already soaring Wall Street extended its advance Tuesday after the Federal Reserve left interest rates unchanged and assuaged some of the market's fears about the economy. The Dow Jones industrial average shot up more than 330 points, and all the major indexes had gains approaching 3 percent.

The market was enjoying a big rally before the Fed meeting as investors responded to a report that services sector activity fell less than expected last month and to another drop in oil prices that took crude as low as $118 a barrel.

The Fed gave stocks another huge push higher in the last hours of trading. In a statement accompanying its widely expected rate decision, the central bank reported that "economic activity expanded in the second quarter, partly reflecting growth in consumer spending and exports." That assessment was welcome news to a market that has feared the economy was falling into recession because of weak consumer spending.

Early in the session, shares rose sharply after the Institute for Supply Management, the trade group of corporate purchasing executives, said its services sector index rose to 49.5 from 48.2 in June. Analysts surveyed by Thomson Financial/IFR predicted it would rise to 49.0.

Any reading below 50 signals contraction. The report is based on a survey of the institute's members and covers such indicators as new orders, employment, inventories, prices and exports and imports.

The notion that the sector might be in better shape than many investors feared gave Wall Street reason for optimism.
http://biz.yahoo.com/ap/080805/wall_street.html


..."economic activity expanded in the second quarter, partly reflecting growth in consumer spending and exports." What a honey pot that nonsense is. Economic activity in the second quarter was barely above water ONLY because of the $168 BILLION dollar handout from the government. To suggest otherwise is blatantly misleading and a lie. Oh but the Fed said so, so all the world's problems have been solved. BAH!

Just yesterday we got this headline:

Rising prices stifle impact of stimulus payments
US consumers dig in amid rising prices, softening impact of government stimulus package

In June, the second biggest rise in prices in nearly three decades muted the impact of billions of dollars in government stimulus payments, government figures showed Monday.

Incomes barely budged in June and consumer spending retreated after taking into account the higher prices for food, energy and other items, the Commerce Department data show.

Consumer spending was up 0.8 percent in May and 0.6 percent in June, the Commerce Department said. Those increases were slashed to a modest 0.3 percent increase in May and a drop of 0.2 percent in June, however, when adjusted for rising prices of gasoline, food and other products. Incomes rose just 0.1 percent.

An inflation gauge tied to consumer spending jumped by 0.8 percent in June. That was the second biggest monthly increase since 1981.
http://biz.yahoo.com:80/ap/080804/economy.html

The only thing growing in the second quarter was the rate of inflation and the federal deficit. To suggest otherwise is deceitful.

The ISM Purchasing Managers Index rose to 49.5! Yeha! And it was "BETTER THAN EXPECTED"! Yeha! Never mind the fact that any number below 50 equals contraction. It was BETTER THAN EXPECTED! The delusion is mind numbing. Doomed is too tame a word for the future of this lost nation.

Gold and Silver were battered in the rush to euphoria. Today was a mega short squeeze in the general equities, and nothing more. Gold and Silver and their related shares the victims of naked short selling. Of course that is only illegal if it threatens a broker dealer for the US government, or two insolvent mortgage flippers.

I continue to watch in amazement, and I continue to laugh at it all. None of this is real and will only make more damaging the eventual fall. Nothing has changed...the financial system still rests on the edge of a cliff. The housing sector will continue to slide lower. Home foreclosures will continue to rise. Banks will continue to bleed from the credit derivative mess they have created. Jobs will continue to be lost. And the Dollar WILL get crushed. Gold and Silver are your only protection from the Doom on the horizon...DO NOT BE PERSUADED TO LEAVE THEIR SAFETY to chase this bear market rally in general equities, it will all come crashing back to earth in short order.

On Sale: Gold and Silver

Oil prices drop nearly $4 after storm threat eases
NEW YORK (AP) -- Oil prices plunged to a three-month low Monday, briefly tumbling below $120 a barrel in another huge sell-off after Tropical Storm Edouard seemed less likely to disrupt oil and natural gas output in the Gulf of Mexico.

Also weighing on oil prices Monday was a report by the Commerce Department that consumer spending after adjusting for inflation fell in June as shoppers dealt with higher prices for gasoline, food and other items. That fed investors' expectations that a U.S. economic slowdown is sharply curbing U.S. demand for fossil fuels.

The dramatic dive came after traders learned that Edouard, aiming for the coasts of Texas and Louisiana, likely would not damage offshore oil and natural gas drilling platforms that sit in the storm's path.

Adding to the bearish sentiment around oil, Democratic presidential candidate Barack Obama on Monday proposed that the government sell 70 million barrels of oil from its strategic reserves to help lower gasoline prices. He had previously opposed tapping the supplies, but said in a major energy speech that past releases from the reserve have "lowered gas prices within two weeks."
http://biz.yahoo.com/ap/080804/oil_prices.html

What a load of crap. The first advisory that came out about Edouard was late on Sunday afternoon. This storm developed rapidly over the weekend, and it should be noted that prices NEVER rose on fears about this little storm. Why then does the media claim that prices are down on the "relief" that Edouard will NOT be disruptive to Gulf Oil interests...it was never a threat to begin with.

Yet again we get the excuse that Oil is down because "consumer spending is down" and that fact extrapolates into the "belief" that an economic slowdown will drastically reduce US demand for Oil. Last week, supplies of gasoline were down by a "surprising 3.5 million barrels. This threw cold water on the "speculation" that a slowing economy would curtail gasoline use. Not to mention the fact that gasoline demand rose to it's highest level of the year in last weeks report. It should be noted as well the obvious decline in gasoline prices that we have all seen. Gasoline is "on sale". Americans love sales, I suspect they will be using more gasoline should prices drop further.

The increased demand for gasoline at sale prices only make Barack Bin Laden's proposal to sell 70 million barrels of Oil into the market even more ridiculous...even if it did result in lower gasoline prices. Let's not forget that America consumes 20 million barrels of Oil each and EVERY day of the year. 70 million barrels of Oil would not even last four days. Is this not the dumbest idea you have heard of yet? The Strategic Petroleum Reserve is for EMERGENCIES, not for lowering gas prices! The lower gas prices go, the more Americans will use, and then they rise again...it won't solve a damn thing. Simple pandering to the sheep for votes. Pathetic and irresponsible example of leadership if ever there was one.

Why such a great interest in creating the "perception" that falling Oil prices will fix everything?
Because if gas is cheaper, then people will have more money to "just spend". After all, 70% of the US economy depends on consumer spending. It is your civic responsibility to spend, spend, spend! And falling Oil prices will destroy that evil Inflation. No, I'm sorry to inform everybody once again, falling Oil prices will do NOTHING to stop Inflation. Inflation is on the fast track now, and Oil prices are not the cause of it. That is what the government wants you to believe. They preach it every chance they get aided and abetted by the subservient news media.

Inflation is caused by an increased money supply. And the US Government is increasing the US Dollar supply in excess of 15% annually. That is causing the Inflation. That is causing the rising Oil prices. Rising Oil prices are a direct result of a rising money supply. It is patently STUPID to believe that rising Oil prices "cause" Inflation. Rising Oil prices might "fuel" rising prices in general, but they are not the "cause" of Inflation, the Federal Reserve is. Inflation is here and it is going to get catastrophically worse before it gets better, and a 20% drop in Oil prices is NOT going to change that in any way shape of form. Go ahead and sell your Gold on the drop in Oil prices. You don't deserve to own it.

What has crude oil got to do with gold prices?
He asked me: “What do higher crude oil prices do to the general price levels in the world?” I said: “Of course, higher crude oil prices fuel inflation, since most of the demand for oil is inelastic.” He further probed: “Is gold a kind of proxy currency?” I said: “Yes. In fact, in the 1900s, many countries in the world had gold standards — gold was used as a medium of exchange.”

Let’s presume that gold was the currency now. How much gold would be required to buy a barrel of crude oil? Or how many barrels of crude oil will be required to buy an ounce of gold? The answer is around 7.3 barrels of crude oil would fetch one ounce of gold. This ratio is known as the ‘gold-oil ratio’.

He continued his questions: “Paper currencies like US dollar tend to lose their purchasing power over the years, why?” I replied: “Simple — due to inflation.” As time passes, paper currencies can’t buy the same amount of oil which you could have bought years ago. And the final words of wisdom came from him: “But gold is different.

It preserves value — better known as a store of value — and that’s the reason why gold is used to hedge inflation.”
He said: “Look at the very long term chart, the average number of barrels required to buy one ounce of gold is around 14.5, which is now at 7.3.”

I nodded in affirmation and said: “That’s because crude oil has moved up sharply from $38 in 1980s to $123 (high of $144), whereas gold has not moved in tandem. It is still trading near $910 per ounce, a little more than the 1980s high of $850 per ounce.” He jumped up and said: “Bingo, now for the gold-oil ratio to reach its long-term average of 14.50, at current prices, either the crude oil price has to move down to $63 or the gold price has to move up to $1,700.”

As I was leaving his office enlightened, I thought with the current uncertain geo-political situation in oil-rich countries such as Iran, Iraq and Nigeria, and with no new discoveries, crude oil seems unlikely to move down to say $63 levels for the gold-oil ratio to reach its long-term average of 14.50. In that case where would gold go?
http://economictimes.indiatimes.com/Features/The_Sunday_ET/Money__You/What_has_crude_oil_got_to_do_with_gold_prices/articleshow/3319957.cms

The sale prices on Gold and Silver won't last forever, I doubt they last the month. Only ignorance stands in the way of higher Gold and Silver prices now. The delusion that has overwhelmed market psychology has unwittingly conspired to offer savvy investors yet another opportunity to load the boat with Silver and Gold and their related mining shares. Gold and Silver are at or near HISTORIC lows in relation to the price of Oil. Take advantage of it NOW!

Now would be a good time to point out the "seasonal" weakness in Oil that tends to develop year in and year out in June and July. June and July Oil prices are seasonally weak as summer demands for gasoline have been met, and demand for heating oil is at it's lowest between June and August. Demand for winter needs begins to pick up in August, and peaks in late October.

See a seasonal chart of Oil here:
http://spectrumcommodities.com/education/commodity/charts/cl.html

A very strong point should be made and considered. On March 18, as the Fed bailed out Bear Stearns, Gold traded at $1013. On that day Oil traded at $104. It seems unlikely that Gold was trading at this level in relation to Oil because of "higher Oil prices" when today Gold is down substantially, and Oil prices are higher even as they have come off recent highs. If Gold didn't follow Oil prices higher then, why is it following them down now? Gold rose over $1000 at that time becasue of severe threats to the financial system. Those threats still exist today and are frankly more severe than they were considered then. Inflation has exploded since March as well. But as long as the public continues to grasp the delusion that Oil prices cause inflation, Gold prices may suffer the consequences and reflect the delusion and denial of the truth about the "soundness" of our financil system.

The Oil bubble has not burst. Not that Oil is in a "bubble" to begin with. Oil is merely taking advantage of it's seasonality to consolidate recent gains. Demand for Oil "globally" is NOT diminishing. It continues to grow. Oil consumption no longer revolves around the demands of the US consumer, but the World consumer. Grasp this fact and ignore the "reasons" the media gives you for the drop in Oil prices. The media exists to shape public opinion and distract you from reality. Take advantage of this opportunity and buy more Gold and Silver.

For a more detailed explanation of the Oil market I suggest reading this recent essay from Adam Hamilton. Adam has a most unique and easy to grasp interpretation of this raging Bull market in Oil. You can find his essay Gaming Oil Corrections by clicking this link: http://www.zealllc.com/2008/gameoil.htm