Anyone who has read my blog for some time, knows that I am bullish on oil over the next 12-24 months. I recommended purchasing oil in the 50s and low 60s . I still like it over that period, but think it ran up a bit too fast. Rex Tillerson, CEO of Exxon said on 6/16/09 The recent rise in oil prices is mainly caused by the weak dollar and not supported by market fundamentals. “When you look at just fundamentals, there’s not a lot to support this kind of price movement we have seen…in the last six weeks…Concerns about a weakening dollar and coming inflation have led some investors to bet on an economic recovery and try to get ahead of a rally.”
Source: Rex Tillerson, Exxon CEO statements made at a gas conference the Dutch city of Groningen.
My Comments: In Germany you can now buy gold out of vending machines in the subway. Gold is a funny asset that many people believe is the only real hedge against inflation. The problem is you will always need willing buyers and sellers and during panics it usually goes up and during periods of normalcy everyone forgets about it. It is the wrong asset to buy and hold for decades, but can provide some diversification benefits during periods of uncertainty.
My Comment:: Watch copper and crude, they should rebound first. Two weeks ago in this blog I said I like crude for the medium to long-term in the mid-forties. Crude will bounce around on news of demand shifts, economic outlooks, etc. However, over the next couple of years, it should move higher as the global economies rebound and supply cuts from OPEC.
IMF Report: Commodity price declines have not abated and have led to massive
terms of trade shifts. Looking forward, commodity prices are unlikely
To recover while global activity is slowing. (IMF Report)