Lower Oil To Fuel Gold Higher In 2014

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  • The world’s largest political risk consulting firm is Eurasia Group. In an interview with CNBC news yesterday, company president Ian Bremmer predicted that in 2014, oil could easily fall to $80, or much lower. For more information on Eurasia Group, please click here now .
  • “Even without an Iranian deal, the Saudis are going to have to reduce production just to maintain a price floor above $80 [a barrel] by the end of first quarter,” Bremmer said. If an Iran deal happens, we’re going well under that. The Saudis won’t be able to keep that going….”– CNBC news, Jan 6, 2014.
  • Barring a black swan event, lower oil prices are quite likely in 2014, and that should be viewed as very good news for gold investors!
  • Lower oil is good news because oil imports are the main cause of the Indian current account deficit (CAD). The current Indian government has done nothing substantial to reduce oil demand and transportation costs for its poor, so only lower oil prices in the market can affect the CAD.
  • The Indian government has, unfortunately, engaged in vicious attacks on the world’s largest gold jewellery businesses, and impoverished millions of goldsmiths. That has indirectly hurt Western gold stock stakeholders. In a page probably taken from a “bizarre and surreal actions” handbook, the current Indian government has begun openly discussing the idea of regulating the amount of gold an individual Indian bride can receive at her wedding! This type of freedom-restriction is not economic progress.
  • Indian government gold import restrictions risk creating a “gold jewellery stone age”, where Indian mobsters take total control of the world’s largest gold market. Until the restrictions bombshell exploded, Indians were the main end users of gold produced by Western mining companies.
  • Demand drives price. With demand taken off the table, it’s difficult for the price of mining stocks to rise significantly.
  • Gold ETPs (exchange traded products) are bought mainly by Western investors. They buy gold as a “flight to safety” trade.
  • Unfortunately, in the big gold demand picture, the amount of gold these Western investors need to buy, to make up for current lost Indian demand, is far beyond anything they are likely to purchase,unless there is a new and extremely dire financial crisis.
  • Another financial crisis that threatens the existence of the financial system will almost certainly occur, but it could be many years away.
  • For the sake of all gold market stakeholders around the world who want realistically higher prices, it’s critical to get the Indian import restriction yoke off the global gold market’s back, permanently.
  • Quite frankly, neither a temporary import rule change, nor a blip in ETP buying, are medicinally strong enough, to heal the gold price patient.

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