We have finally gotten our break in oil. That is a major fundamental relief because with manic oil bulls stampeding, congress and the administration fretting (and plotting hair brained solutions) and the Fed stuck in a box made with walls of Greenspan's easy money policy (inflation) and the effects of that policy (escalated prices), all of us - from the average guy going paycheck to paycheck to precious metals investors - were being held in suspended animation.
The Fed is not simply pretending to be concerned about inflation in this scenario, they ARE concerned because a price explosion like that of oil - and especially the one likely in gold at a later date - threatens to discredit the institution for all to see as they pray to the munny gods for the ability to ease policy while at the same time some moonshot asset class slaps them upside the head day after day.
Unfortunately, a major break in crude may also mean a confirmation of a crippled global economy and for precious metals investors, as I have mentioned endlessly, it could mean a mass exodus of the dreaded 'all the same commodity complex' bulls. See John Hussman's Total Return Fund. Once he became acutely bearish on oil, he dumped his precious metals shares. Since this is an analyst whose opinions I respect, I move forward with this in mind much as I have with Prechter's gold bearish view for years now.
Anyway, enough words. Here are the charts; a daily and a weekly of nominal oil and a daily and weekly of the gold-oil ratio (GOR). We keep in mind that money policy is not improving and that oil is a major cost driver to precious metals miners. We are either right or we are wrong but we remain on a bullish course as long as the fundamentals in which we believe hold true - and as long as the HUI - per Friday's chart - remains intact.
Oil has broken down on the daily but the weekly shows a longer term bull market that could remain intact as long as the current monetary system remains stitched together. The GOR has bottomed and turned up with violence but I would not be surprised to see oil rebound here in nominal as well as gold terms. The charts tell the story:
