Oil: Oil prices at $60 a barrel aren't
sustainable as supplies rise and the world looks
for cheaper energy sources to wean itself off
the costly fuel. OPEC, which determines how far
prices fall, is pumping at its highest level in
a quarter of a century, but prices have marched
higher this year as traders focus on the lack of
refining capacity to turn OPEC's crude into
fuels.
However, in the very long term, prices might go
lower than $40 as consumers are presented with
more energy alternatives to oil. Prices, which
peaked at $70.85 at the end of August, had
spurred significant investment from the private
sector. This will also impact on prices. Since
August prices have tumbled on fears that sharply
higher energy costs will cut into consumption in
the world's largest energy market, the United
States, and in fast-growing economies like China
and India. A reduction in fuel prices is not
unlikely. India is considering such a move.
Gold: Demand for gold is near record
levels and running at 4,000 metric tons per year
while mine production has been steady at 2,250
metric tons per annum. The declining gold
production compared with demand, a weak US $ due
to extreme debt levels and deficit spending (US
$ 450 billion on the war on terrorism),
foreigners withdrawing their US investments, a
weak US economy and negative real interest rates
were some of the other drivers propelling gold
price upwards.
In European trade, the yellow metal edged higher
in a relatively quiet market, with industry
players looking at currency markets for further
direction. The world demand for gold has
absorbed quite large quantities of Central banks
gold stocks over the past decade. These stocks
cannot be relied upon to fulfill the shortfall
in demand over the coming decade. New
discoveries will have to be made. Smaller gold
mines will spring up until large new discoveries
are made. It will be wise to keep investing in
gold on a regular and systematic basis.
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