Special Update on Crude Oil and Gold – 2nd July 2010

By Taran Marwah

We are posting a special update on two commodities which we track since the year 1980.
These happen to be two commodities which are now most actively watched by the investor community globally – Crude Oil and Gold.

We start with Crude Oil. Our predictions are “too early” vis a vis” actual events. We had earlier predicted (in January 2010) that Crude Oil prices will test US $150.00 pbbl by June 2010. We did not mention the reason or the background of the said prediction in January 2010. We wish to share that this prediction was based on” surgical air attacks” by USrael ( USA plus Israel ) on all the nuke assets of Iran. We had predicted that the said air attacks by USrael will take place in the month of June 2010. These air attacks were then postponed to sometime in the year 2011. In view of some developments in Riyadh we are predicting on air strikes as per under.

We predict with certainty that USrael will attack Iran’s nuke assets anytime from 11th July 2010 thru 22nd September 2010. In view of this the Crude Oil prices will spike to US $ 150.00 pbbl to US $ 180.00 pbbl. If the said attacks are contained within the boundaries of Iran – then the Crude Oil prices after spiking to US $ 150.00 to 180.00 pbbl, will settle down at US $ 100.00 pbbl in a matter of a few weeks. If the situation gets out of hand and US cannot control Iran’s retaliation by way of missile attacks on US allies in West Asia including Israel – then we are heading for a “chaos” in the fragile West Asian region. Consequences will be addressed at an opportune time post the said attacks. In this scenario – prices of Crude Oil could stay well above US $ 100.00 pbbl level till the situation is brought under control by the US. As per our information – the said attacks already have the approval of POTUS and it is up to Washington and Tel Aviv to decide the time frame of the said attacks.

We have given the time frame as above for the said attacks. The attacks will by Israeli ‘F-16s’ and US ‘F 22 Raptors’ and will be initiated from Israeli soil and US Aircraft carriers somewhere in West Asian waters. These air attacks have the blessings of America’s richest ally in West Asia – Saudi Arabia. Saudis have given approval to USrael to use their air space for the said attacks till end September 2010. The Pakistani nuke assets may also be attacked during the said mission on Iran by USrael. The ‘F-22 Raptors’ have just to fly eastwards after attacking Iran and then attack Pakistani nuke assets. US will once for all – will annihilate complete Pakistani nuke assets, as it cannot afford Taliban to get a hand on any type of nuke weapon.

In event of these attacks – we advise investors not to “short” Crude Oil after 11th July 2010.
Crude Oil technically becomes bearish after it breaches US $ 56.25 pbbl level. There is a very strong support at US $ 68.00 pbbl. If this level is breached in July and August 2010 – the next important support is at US $60.00 pbbl. This too is a very strong support. We advise investors not to short Crude even if it breaches US $ 60.00 – 56.25 pbbl levels. This will be a ‘classical bear trap’ by the illuminati as post testing these levels – the said air attacks will happen. We hope we have made our view point clear on the price movements for Crude Oil.

Gold is becoming a “headache” for the bears since the past four and half years. We have been getting messages (since the past four years or so) when the Gold price was around US $ 570.00+ pto that the prices will correct to US $ 500.00 pbbl. When the prices moved to US $ 750.00+ pbbl – we started getting messages that Gold prices for sure will correct to US $ 500.00 pto. This kept on till the prices tested a lifetime high of US $ 1261.00 at LME Spot in end June 2010. We stuck to our stand that Gold prices will not come down to US $ 500.00 pto levels since the past four years. We stuck to our stand that buy Gold on dips since the past four years or so. We were dead right.

Analysts are now predicting at around US $ 1250.00 pto levels that prices of Gold are in a ‘bubble zone” and the bubble will burst anytime. We repeat – There is no bubble in Gold prices worldwide. We stick to our target for Gold prices @ US $ 1500.00 pto latest by end December 2010, if not earlier. Our target price of US $ 3000.00 pto by end December 2011, is already on our webpage.

We predict China and Russia to stop exporting Gold to the world markets, latest by Q1 2012, if not earlier. There will be a shortage of physical Gold delivery on the world markets for buyers/investors by end of the calendar 2011. This will be “trigger point” of Gold prices shooting from US $ 3000.00 pto levels to US $ 4500.00 pto levels in Q1 thru Q2 of calendar 2012.

Further – Gold prices will continue to rise (with corrections on the way ) till end December 2012 wherein our predicted price is @ US $ 6000.00 pto. This price could be even higher as we predict – arson, looting, labour strikes etc by workers in the major Gold mines in South Africa. The labour unions will ask for ‘their pound of flesh’ by way of hefty bonuses, as these mining companies make super profits. Almost all major Gold mining companies in South Africa have majority “foreign ownership”. The total cost of production of Gold is around US $ 300.00 to US $ 700.00 pto depending upon where the mines are located around the world. Hence the fair price of Gold is US $ 1000.00 pto. We agree with this costing but Gold prices will not move on this ‘cost plus pricing method’. They will move on the alternative pricing method -what the “market can afford”. Global market prices will as mentioned above.

This predicted labour unrest in South Africa will lead to complete shut down of the major Gold mines in South Africa by Q2 thru Q3 of calendar 2012. We predict that the Govt of South Africa will step-in and nationalize all Gold mines before the end of 2012 and ban all exports of Gold by Q2 thru Q3 2012. This will lead to Gold prices touching levels in excess of US $ 6000.00 pto. It is worth while mentioning that as of date South Africa is no longer the world’s largest producer and exporter of Gold. South Africa is the world’s second largest producer and and exporter of Gold marginally behind China. South African production and exports of Gold as of calendar 2009 were at approx. 268.00 mt marginally behind China’s like to like figure of approx. 271.00 mt.

The other factors for Gold prices to test levels in excess of US $ 6000.00 pto levels by end December are “hyperinflation” in USA by early 2012. Yes – we understand there will be a serious “deflationary period” in the US economy in 2011 but this will be followed by “hyperinflation” sometimes towards Q2 2012. Hyperinflation will cripple the US economy with a complete collapse of the banking infrastructure in the world’s largest economy by end 2012. Just on the lines of 1930 after the ‘Great Depression” of 1929. We expect a repeat of the situation in America in 2012. US Dollar will lose its ‘Aaa rating’ sometimes in early 2012. This will be another trigger for Gold prices to rally. Gold is a hedge against inflation. As per us Gold is also – “Sum of all fears’ !

Where does one invest as Euro will also be a ‘doomed currency’ by end 2011. The concept of Eurozone might ‘fail’ as Germany might say that expel – Spain Greece and Portugal from the EU or else we will leave the EU and go back to our old currency. These are distinct possibilities as Greece and Spain will again come with “begging bowls” in hand in six to nine months as of today, for more alms ? Plus do not forget Portugal and Italy followed by Austria and Ireland.

Hence in view of all these developments – Gold prices are not going to come down till the end of 2012. Somewhere in early 2013 – there will be a ‘new economic world order’ with US Dollar no longer being the “world’s reserve”currency. The new currency will be strongly linked to the Gold standard. We will see as the events fold in the next thirty months.

We expect a “L” shaped recovery in the US economy from 2013 thru 2107. When US sinks – so will China, Japan, South Korea and Taiwan in that order in 2011 thru 2012. Brazil and Russia will also tank but with a smaller beta. Indian economy will be least affected with a smallest beta. This does mean that Indian equity markets will not correct when the above said equity markets correct respectively. Indian equity markets are heavily dependent on FII inflows as this information is in public domain and the inflow figures are published by SEBI.

We again strongly recommend to all investors to prune their exposure to equities. Only have in your kitty – Crude Oil and Natural Gas producing stocks ASAP. Balance cash to be deployed to buy Gold on dips from date till end 2011.

In view of the above – we need not say much what will happen to global equities in July thru September 2010 on the back of the said air strikes. We expect ^DJIA to test 6750 to 6470 levels in August 2010 and BSE SENSEX to test 12500 level. Indian analysts are expecting BSE SENSEX to rally in the next three months – July, August and September 2010. Our view is totally the opposite with due regards to established pundits in India. We expect global equity markets to recover marginally in Q4 2010, if the Iranian situation is contained.