Where next for oil and gold ? - the speculative bubble map updated

Oil prices Brent Crude basis were trading at just under $150 per barrel in July. Any number of justifications were put forward as the market peaked. We listed most in our November blog.

Since then the oil price collapsed below $40. The oil market has experienced the classic speculative bubble mapped by Jean-Paul Rodrigue of Hofstra University.

The Rodrigue chart identifies the four phases of the speculative bubble, stealth, awareness, mania and blow off. In our chart we have updated the oil price to the end of January 2009, Brent crude basis. The build and blow phases are evident but there is some suggestion of recovery and rally towards $60 into 2009.



Gold experienced the early phases of the speculative bubble. The blow off never materialised as the barbarous relic retained favour. Fears for the banking system, falling asset prices, concerns for the dollar, low interest rates, falling yields, expansive money supply, deflation, hyper inflation  any number of reasons to buy Gold and shove it under the mattress. Never mind the lumps.

The Gold price is in classic “hung" mode the most dangerous phase in the investment cycle.

Where next for oil prices, the speculative bubble map. November 2008.

Comments

[JKA]

Jean-Paul Rodrigues comments:
The trend for oil matches eerily well with the bubble graph and indeed there are indications the oil price is bouncing into the $40 - $50 range (or maybe higher depending on the level of "stimulus" aka printing money, spending). A similar trend has taken place with the Baltic Dry Index which has bounced back a bit from December lows.
Gold is another story as it is at the same time a commodity and money, deflationary forces have been strong but inflationary / safe haven forces have compensated.
JP

[Monyet Miskin]

But if you look at it in $AUS terms, the price is the highest ever (I don't know how it is in other currencies). So, as an Australian resident, should I take notice of the $US price, or the $AUS?

[JKA]

Many thanks for your visit and comment.
As a trader you have to track three charts, Gold in $US, the dollar exchange rate, and Gold in A$. I have sent by separate note the charts in question, together with comments. Of course we are not licensed investment advisers and unable to give specific advice as such. But just for fun we sometimes do without prejudice.
JKA

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[Krugerrands]

ya gold price and oil price fluctuate simultaneously. if oil price are high then it will be the right time to sell gold.

[Tsavorite]

Gold Gold Spec experienced early stages of speculative bubbles. blow off never materialized as a barbarous relic retained favor.

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Gold is another story as it is at the same time a commodity and money, deflationary forces have been strong but inflationary

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