Gold News

Independence Day for Drivers

Pricing crude oil out of the Dollar and into gold this Fourth of July...

SO LAST WEEK'S spike in the price of Brent crude oil – the North Sea benchmark – was due to a "rogue trader".

His unauthorized dealing through the PVM brokerage drove the price up to $73.50 per barrel and reportedly sparked 30 times the typical trading volume for the dead of night as computer "bot" traders raced to catch up. It also incurred a loss of $10 million, and threatens to re-ignite US policy-makers' loathing for Wild West speculation in commodities.

But whatever the regulators missed this time – and whatever the trader's boss may (or may not) have been up to, issuing a strongly bullish note to client just hours after the position was taken at 2am – that spike hardly compares to last summer's run. And averaging nearly $70 per barrel in June, the price of US crude oil only just got back to its average monthly price of the last four years.

That's not much of a recovery, even if it is a double since Christmas, given the monthly top of $132 per barrel hit this month and last in 2008. And it's peanuts next to the record daily close of $145 hit on Bastille Day, July 14th '08.

This Fourth of July, however, and not least if you're out driving, spare a thought for just how much more expensive crude oil and thus transport, heating, detergents and plastics are today than back before the credit bubble morphed into the financial crisis and then into today's global depression.

Also note how the spike of '08 was only slightly tempered for European drivers and households when the North Sea benchmark, Brent crude, is priced out of Dollars and into the British Pound.

Whereas, if priced in Gold – a simple enough concept amid rumors and counter-rumors of Chinese grumping over the Dollar's volatility, plus muttering over a new world reserve currency – crude oil is now back pretty much where it was throughout the low and falling trend of the late 1980s and 1990s.

Just a thought.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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