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Attention Gold Bulls: Oil Is Leading the Way

Long-haul trucks are just now joining in, while taxis, local delivery vehicles, busses and other traditional petroleum consumers have demonstrated reliability for years. It's just a matter of time before passenger vehicles are sold with natural gas as the energy source straight from the factory.

Aluminum, copper, lead and nickel prices are all also trading near 12-month lows. If the price of gold is directly related to non-existent inflation in U.S dollars, gold is not going to climb. It really doesn't get much simpler than that.

But . . . but . . . but . . . the Fed's printing press is working overtime and dollars are flooding the market! Inflationary money supply growth may be true and wisely monitored; however, the material importance is the relative lack of dollars exchanged for products. Remember, there are two sides to supply and demand. An increase in demand (more dollars) will not result in an increase in price as long as a relative increase in supply (like nat gas and oil) occurs.

The situation in Europe only builds the gold bear case as a result of gold priced in dollars. As the euro falls in value against the dollar, demand for gold decreases. The U.S. 10-year yield closed at a record low of 1.71% on Thursday. I am not attracted to locking in capital for 10 years at less than 2%, but obviously, enough believe it's a good idea to make it happen. 1.71% yields is the market equivalent to a neon sign flashing "no inflation."

As a result, gold bulls refusing to adapt may soon become reacquainted with another song of 1980: "You've Lost that Lovin' Feelin'" by Hall and Oates.

Author does not hold a position in any stock mentioned.
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