Attention Gold Bulls: Oil Is Leading the Way

NEW YORK ( TheStreet) -- The printing presses are running 24/7, the debt levels are unsustainable, China and India are showing growth, gold is a storehouse of value, _____ (insert the latest reasons here). The reasons for gold moving higher continue ad nauseam despite inflation's deafening silence.

Pundits of higher gold prices have called it correctly for so long; many have likely forgotten what it feels like to get it wrong. The $2,000 gold hysteria and subsequent price fall is déjà vu all over again (thanks Yogi Berra). If you're old enough to remember, the gold bubble song played in 1980 along with Diana Ross's hit "Upside Down," which is what gold investors quickly became if they bought and held. In the first weeks of 1980, most newspapers printed gold prices on the front page: $1,000 an ounce (and higher) was declared a "sure thing." Prices didn't bottom after until reaching lows under $300.

Fast forward to 2012, the music has changed as clearly as the ground has shifted. Surprisingly, gold bulls continued babble of "the deficits are coming, the deficits are coming," largely remains. A look at the most popular gold SPDR Gold Trust ETF ( GLD) reveals lower highs and lower lows. Last week came within pennies of breaching the lows this year.

And, to a certain degree, they have a measured and valid point. Few will agree federal spending is under control. However, deficits are all that gold bulls have left to cling to as they dangle over a treacherous cliff, a vantage point many haven't experienced.

Unfamiliar with what a bear market is, gold bulls steadfastly view price drops as buying opportunities. Perceived as entirely reasonable, at least in their minds, the air below isn't filled with peril, while in truth, their grip slips away.

Gold's most attractive attribute is the ability to store value as an inflation hedge in U.S. dollar terms. But where is the inflation? It's not in oil, and when energy is cheap, all commodities tend to follow.

Consumer Reality

Take a look at the ETF United States Oil Fund ( USO) price chart to see the direction of oil prices. On Friday, USO made a new 2012 low. The USO allows investors to position in oil through an equity product.

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