Gold and Oil Prices Surging

Larry Edelson takes the correlation between the global economy and the pricing of gold and oil. In this issue of Money and Markets, Mr. Edelson examines the reasons why gold and oil are both at a all time high and the giant cracks in the economy their highs reveal.

Jupitor, Fla. (PRWEB) January 12, 2008 -- Larry Edelson takes the correlation between the global economy and the pricing of gold and oil. Mr. Edelson examines the reasons why gold and oil are both at a all time high and the giant cracks in the economy their highs reveal.

Gold and oil prices could be headed much higher in 2008. Gold has recently reached as high as $893 an ounce, above its all-time record high of $877 set on the Comex in New York on January 18, 1980. There are three important points that are significant in the new record highs in gold and oil.

First, they show that inflation is coming back with a vengeance. The U.S. has already seen the first signs in November's inflation data, which indicated the biggest increase in wholesale prices in 34 years. And that was before the latest round of money pumping by the central bank. All told, more than $750 billion has been thrown into the global economy in the last five months. As this money works its way through the global economy, inflation is sure to rise substantially.

Second, the new highs in gold and oil also reveal the giant cracks that are beginning to appear in the world's financial system. These cracks are: financial insecurity, geopolitical worries and outright fear.

On the surface, everyone is blaming the subprime mortgage crisis. And to be sure, the subprime crisis is a big factor. But the subprime disaster is symptomatic of a much deeper problem, the near bankruptcy of the entire United States.

The U.S. is $55 trillion in debt. $9 trillion of it is Federal government debt and $3.9 trillion is owed to foreign interests. The more than $42 trillion left is owed by municipal governments, trust funds, households, businesses and financial companies. All told, U.S. debts have now reached 460% of national income. There is absolutely no way those debts can ever be repaid without continuing to systematically devalue the U.S. dollar.

But that's not the only crack driving gold and oil higher. There are also cracks and fissures in geopolitics, including uncertainties surrounding the U.S. elections. These worries can drive investors into tangible assets, which adds to inflationary pressures and drives natural resource prices even higher.

Third, investors are beginning to lose confidence in governments and central banks. When investors are confident in government and central bank policies, inflation tends to be low or declining. And then, municipal and government bonds do well and tangible assets like gold and oil tend to be mostly ignored.

But growth and demand in Asia could offset any weakness in the U.S. Any pullbacks should be treated as buying opportunities within major bull trends.

For example, China has very little debt and no major exposure to the U.S. subprime collapse. It has $1.4 trillion in reserves and some of the strongest banks and financial institutions in the world as a result of these reserves. Also consider that there are 1.3 billion people who are just beginning to emerge as a consumer class.

Moreover, Beijing has committed to spending more than $700 billion on rural infrastructure projects to bring China's 800 million farmers and peasants into the 21st century. That alone is enough to keep China's growth cooking for many more years.

And take a look at India: It has no major external debt and no major exposure to the U.S. subprime crisis. There is an estimated annual economic growth rate of 9% for 2008. And another 1.1 billion emerging consumers, including a middle-class of 320 million.
India is now home to the largest number of billionaires in Asia and the number of millionaires in India is growing at a 20.5% annual rate, the second fastest in the world behind Singapore.

"Many of these same trends can be seen in other Asian countries like Indonesia, Malaysia, Vietnam and Thailand as well. And while there are bound to be some wild swings in these markets in 2008, their growth curves remain intact and will continue sharply higher regardless of a downturn in the U.S.," Mr. Edelson states.

To read this issue online, please visit:
http://www.moneyandmarkets.com/issues.aspx?Gold-and-Oil-Hit-All-Time-High-Prices-3

About Larry Edelson and Money and Markets:
With nearly three decades of experience in precious metals and natural resources markets, Larry Edelson has played a pivotal role in training Weiss Research staff and in guiding Weiss Research's customers to prudent investments in the sector. His Real Wealth Report, Gold Trader Hotline and Energy Options Alert provide a continuing education on natural resource investments, with recommendations aiming for both profit and risk management. His team of technical analysts helps enhance the timing of investment recommendations with the aim of continually improving the performance results for investors.

Mr. Edelson is also a regular contributor to the daily e-letter, Money and Markets. Recognized as an expert in precious metals and natural resources, he is often called upon by the media for his investing views. Mr. Edelson has been featured on Bloomberg, Reuters, and CNBC as well as The New York Times, New York Sun, and Marketwatch.com

Mr. Edelson holds a B.A. degree from Columbia University.

Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.

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