Inflation Fearing Markets Selloff
A: The price of oil tumbled this morning below $70/Barrel again as the market beared some pretty rough news in Iran & Nigeria very well. The Saudi Arabia oil minister said that high oil prices will eventually hurt global demand as market forces will lead investments into alternative energys' that will come to fruition in the decades to come.
According to CNN Money:
The oil minister for Saudi Arabia, the world's largest oil exporter, said Monday high oil prices lead consumers to think twice before they spend.Also participating in today's selloff are the prices of Gold and other precious metals. Copper in particular was especially hard hit as this precious metal was off 8% in early trading Monday; Gold was off 2% and down to $695 or so. Here is a 6-Month chart showing Gold's incredible rise using Kitco.com:"In general, when prices are high people check their pockets," Ali al-Naimi told reporters on the sidelines of an energy conference in Jordan.
"When they are lower, they open them."
The minister's comments follow a report from the International Energy Agency Friday in which the adviser to 26 industrialized countries cut its global oil demand growth forecast due to high prices.
KEEP IT COMNG DOWN!!
UrbanDigs Says: Confidence in Housing will rise, at least psychologically and over short-term, once the Fed decides to PAUSE with their interest rate hike campaign. For the Fed to consider pausing at June's meeting the economic data MUST show that the previous 16 interest rate hikes are having an affect and that the inflation leading indicators (high energy prices, high precious metal prices) are starting to correct.
The precious metal markets have been heavily invested in by hedge funds and speculators over the past 4-6 months and could see a correction. However, the oil markets have core fundamentals that are powering the rise in energy prices and a correction in this market could be short-lived as global demand still outweighs supply.
"The fundamentals are still for the price to go up," Dawnay Day Quantum's Mathias said. "If it drops much below $70 it's a good buying opportunity."Should oil correct to the upper 50's or so and stay there, it could be a sign that geopolitical concerns in Iran are less tense than first feared OR that the situation in Nigeria is more under control that first thought. Any positive news out of Iran or Nigeria should cause most speculative oil traders to PULL OUT, which would lead to a drop in energy prices to a new trading range until the next news making situation presents itself."We're still looking at $100 oil in a couple of years time, because there just isn't enough oil to go around."
