Friday, October 5, 2012


Generally speaking, I'm not one to put much faith in conspiracy theories. I don't think the price of gold and silver is being suppressed by the government or the Fed. Our money supply is no longer tied to gold so there is no logical reason for the Fed to care what the price of gold is. No matter how high or low it goes it's not going to affect the Fed's ability to counterfeit dollars at will.

Oil on the other hand I can see a very good reason to attempt manipulation. If the price of oil rises too high it stifles economic growth and will eventually trigger the next recession. During the last commodity bull market we have a clear history of politicians trying to impose price controls on energy, but no history of price control on precious metals.

Over the next month rising oil prices might not be too kind to incumbent politicians. So I could see a logical reason to attempt suppression of the oil markets over the next month.

It is late enough in the intermediate cycle that yesterday should have marked a bottom for oil. If oil were to continue down for the rest of the month moving well out of the timing band for an intermediate bottom I could make a case for something fishy going on, especially if the dollar continues to fall during this time.

However as most people already know artificially depressing price always has the opposite effect by creating too much demand. Eventually that demand overwhelms the attempts at manipulation and the asset or commodity will resume its secular trend at a much faster pace than would have occurred naturally.

The opportunity is that if we see oil held artificially low over the next month, and well past the intermediate cycle timing band, to create a favorable environment for incumbent politicians, then we can expect an exceptionally violent snap back rally once demand overwhelms the manipulation.

The trade would be to buy energy stocks or oil futures right after the elections if oil continues to remain in a downtrend into November.