APR 17, 2018
“Buy commodities” is knee-jerk, reflex advice for what to do when risk assets are set to decline. But buying oil (or corn futures, etc.) isn’t the same as buying gold.
When a stock market decline occurs during a pronounced economic downturn, expect the various commodity inputs to suffer price declines as demand for them wanes. Expect gold to thrive in a flight to safety and as a perpetual hedge again ongoing US dollar woes.
Economist David Rosenberg expects the US dollar to fall. His Recommendation is to buy commodities. Technically speaking there is no support until 80 or so.
I suggest: Forget oil, buy gold. Why?
Oil is an industrial commodity and the global economy is weakening. We may be in late stage inflation similar to the surge that took oil to $140 in 2008.
I believe rate hikes are priced in that will not happen. Moreover, the US deficit is out of control and worsening.
Then again the ECB has rate hike and tapering priced in that are also unlikely.
Globally, if central banks fail to meet hiking expectations, gold rates to be a beneficiary regardless of what the economy does.