With oil plunging near the $60 level and the Dow Jones falling close to 300 points, today an acclaimed money manager spoke with King World News about the historic trading in the gold, silver, and oil markets. Stephen Leeb also discussed what is next for gold, silver, and oil.
Leeb: “Recently silver has been trading stronger than gold and commodities across the board were pretty firm yesterday. But the interesting thing about silver is that it not only has the industrial uses, but it’s also a safe haven purchase for many investors and you can see that in the U.S. Mint purchases of silver eagles….
Continue reading the Stephen Leeb interview below…
“But the markets today may be saying, ‘We had better reflate and reflate in a big way.’ There is trouble brewing over in Europe in Greece and Italy. This has the potential to create major problems in Europe that could cause some dominoes to fall.
And when we look at the oil market, OPEC is trying to cut out some of the overcapacity out of the market. At the same time we have this situation in the United States where our oil recovery is extremely intensive. For every one and a half barrels of oil we get from fracking, it takes the equivalent of one barrel of oil to produce it, and that’s because of the incredible amount of sand, water, and everything else you need to get that incremental barrel of oil. That’s not sustainable.
But more importantly for the gold producers, look at the chart below showing the price of gold vs crude oil.
You can clearly see the price of gold is nearly flat over the six-month period, but the price of crude oil has collapsed close to 40 percent. Well, oil is the major input cost for all gold miners. So the fact that the price of gold has stayed relatively stagnant while the price of oil has collapsed is actually incredibly bullish for the mining companies. This collapsing input cost of oil vs gold will dramatically improve their cash flow situation.
The other bullish development for gold and silver is the fact that there will not be enough commodities available when the world does reflate. When that happens gold is going to soar. There has been massive accumulation of gold all throughout the East, including Russia. This is all part of the accelerating shift of power from West to East. So anyone with a longer-term perspective should own both gold and silver because they are headed much higher than anyone can possibly imagine.”
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