Comment on the April 24 prediction: It was CORRECT, as prices rose the next day to $4.17. Then we saw $4.19 last Thursday, and $4.29 this past Monday.
Tuesday, May 3, 2011, 9:00PM: I want $4.29 to be the high price for the year. You do, too. It would be curious if that turned out to be the case, in that $4.25 was the high in July 2008. Here are some reasons for hope:
1. I maintain, as do many others, that the continued thrust upwards in the prices of energy, gold, stocks, etc., is primarily due to the ultra-loose policy of the Federal Reserve, known as “qualitative easing”, which has been the main contributor to a weak US dollar. The second round of QE, which started last fall, is ending in the next few weeks. I would bet that QE3 doesn’t happen, because of political pressure.
2. I also maintain, as do many others, that one contributor to high gas prices has been speculation in the energy future markets. Actually, I think those markets are broken, with people effectively hording gasoline by using future contracts, which isn’t the purpose of future contracts. It isn’t illegal, but it isn’t in the best interest of our society for those markets to have the rules that they do. Speculators, though, can get too greedy, and they can then get slaughtered.
3. That is happening this week in the silver market. The silver ETF (stock symbol SLV) has demonstrated a classic “parabolic blow-off” lately, and those “investors” who bought SLV at $48 on Friday have lost nearly 20% of their “investment” the past two days, as it is trading this evening at about $40. Sell-offs like this are not isolated, and don’t be surprised if gold is next, then oil and gas, and then stocks. Here is a chart of SLV:
4. I believe the end of Bin Laden by US forces is actually going to trigger reduced tension in the Middle East, as we start pulling our troops out of the area.
Yes, I know I sound like one of those “perma-bears”, trying to stitch together a number of ideas into an analysis. But markets do not go up forever, and it is time to say “enough”!
For future reference, here’s a chart of gas prices since 2005, posted on The Big Picture:
— Ed Aboufadel