Earlier this week, the markets were teased with a micro-rally of gold and oil. Gold closed back down as the greenback rebounded against the euro on Friday. Oil also dropped significantly as a result.
Scanning the media in both broad casted and print mediums, there is a clear division of the opinions where Gold and Oil will be going. By the years end, I have heard the opinions that oil will bottom out at $80.00/barrel or top out at $200.00/barrel. Gold is a lot more tougher to identify bottoms or peaks. I have ultimately decided that based on what I have hear from analysts in the media, no one has any clue where Gold is going to go. People give there educated guess shrouded in market lingo, but no definitive targets.
My personal opinion for Gold and Oil is that it is more likely that Gold and Oil will rise in price as the cost of production for each commodity constantly rises.
The facts are that all the oil and gold has been relatively easy to extract from the earth. It has all been surface level resources. All future deposits are deeper and much harder to extract, thus the cost of production will rise and add on the the market price.
This is a very obvious and simple fundamental look at the futures of these commodities but it gives investors a much better understanding and idea how to position themselves.
With this information, my favorite gold plays are definitely GLD and DGP. GLD is a spot gold ETF and DGP is a double long gold ETN. For a long-term speculative play, the January Option Calls look to be solid.
With regard to Oil, I like the the producers and the refiners, long term calls seems only rational. Especially with Billy and Warren touring the Northern Oil Patch, and Newfoundland beginning to turn the gears forward.
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