Gasoline, Diesel and Oil (oh my!)

[Wol]

Article

 

The bottom line is gasoline and diesel are naturally heavily correlated with the crude oil that produces them. While diesel has dutifully reflected oil’s advance over the past several months, gasoline has not. History clearly shows that this low-gas-price anomaly cannot persist. Gasoline prices will have to be bid up to reflect the economic realities of producing this crucial commodity sooner or later. There is no other option.

 

Gasoline is almost certain to head over $4 at the pumps, and will probably exceed $5 by late summer if oil can stay above $120. This is going to get investors worrying about inflation like nothing else ever could. And the high diesel prices that do reflect crude oil are going to filter into everything tangible that we consume, since it is all hauled by diesel-fueled trucks and trains. This summer we may see the biggest inflation scare since the late 1970s.

 

And when people get scared about inflation, what is the first investment that comes to mind? Gold, baby! Sure, gold has been beaten up since the Fed’s “restrained” 75bp cut in mid-March on dollar-rally-fear sentiment. But it is investment demand that drove gold from the $250s to over $1000 over the last 7 years. And surging inflation fears ought to drive new mainstream investment demand at a pace that hasn’t been witnessed in decades. Rising gasoline sparking inflationary fears should lead to surging gold demand.

[drbubb]

"While diesel has dutifully reflected oil’s advance over the past several months, gasoline has not. History clearly shows that this low-gas-price anomaly cannot persist. Gasoline prices will have to be bid up to reflect the economic realities "

 

US Petrol is too cheap!

 

$4 gasoline, headed towards $5, is going to be a real wake-up call

[malco]

This will create an interesting dilemma if there is an inflation scare. It will create pressure to raise interest rates. The higher rates could knock the gold bull for good. Or, they may fear an economic depression too much so they will just allow inflation to climb and continue to manipulate the data.

[cbs7]

This will create an interesting dilemma if there is an inflation scare. It will create pressure to raise interest rates. The higher rates could knock the gold bull for good. Or, they may fear an economic depression too much so they will just allow inflation to climb and continue to manipulate the data.

 

I expect gold to rise sharply if interest rates go up, as if rates are going up it will mean there is a very big problem with inflation again. I don't have a chart to hand, but didn't gold go up all the way with interest rates in the 70s?