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$800 Gold & $100 Oil?

October 31, 2007

If you would have told anyone that a year ago, maybe even six months ago, they would have left your presence mumbling. Who can afford what a gallon of gasoline will cost from $100 a barrel oil? Granted, oil is only at $95, but…! And while gold dropped back a few bucks after hitting $800 for the first time since 1980, anyone would tell you that speaks volumes about a very dangerous and uncertain future.

Who Wants Cheaper Auto Insurance?

The US$ skidded to a new low against the euro Wednesday while the British pound broke through $2.08 after the Federal Reserve lowered a key interest rate by a quarter percentage point to 4.5 percent.

Gold barreled above $800 an ounce Wednesday for the first time since 1980 as investors cheered the Federal Reserve’s decision to lower its benchmark interest rate by a quarter point.

Oil prices surged by more than $4 to set another all-time high over $95 a barrel on Wednesday in New York after the release of a weekly U.S. government report which showed an unexpected fall in U.S. crude oil stocks.

The central bank also warned markets not to count on further rate cuts, however, saying spiking prices for oil and other commodities were helping to fan new inflation concerns. “Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance,” the Fed said in a statement announcing the move. “However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction.”

We shall see. :-)

Written by Ernie · Filed Under Daily Commentary 

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