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Four Things Suppressing Crude Oil Prices Today
The collapse of talks between Iran and the "Big 6" (the five permanent members of the UN Security Council plus Germany) should have accelerated international crude oil prices.
And yes, they are higher.
But the real spike hasn't hit. Not yet.
The rising crisis atmosphere in the region and the genuine possibility that a fourth round of talks between the two sides will not even take place should have renewed the upward movement.
That hasn't taken place yet, either.
Oil prices are caught between the normal dynamics of geopolitical concerns – which push prices north – and continuing concerns over a global economic slowdown – which results in lowering expectations.
Now, this limbo is a delicate balance; it could change in a matter of hours.
We are likely to see a short-term rise Monday evening if the Norwegian oil and gas sector strike is not averted. Labor negotiations between Norway's oil workers and employers over pay and pensions failed – yet again – yesterday. The country is now just hours away from the first complete shutdown of its oil industry in decades. (Already, the strike has cut oil output by 13%, according to Reuters.)
Then there are the figures coming out from the Energy Information Administration (EIA) on Wednesday, which will almost certainly show a drawdown on U.S. inventories. Normally, that would also push up prices.
However, absent an Iranian move against the Strait of Hormuz or a major refinery accident somewhere in the world, the rise will be less than usual.
That's because right now, four things are tempering the oil price rise:
Higher Gold Prices Triggered by Europe
In early trading Friday, it was like old times again – gold prices soared and it was well overdue.
The yellow metal glistened in early trading, with gold for August delivery rising 3%, propelled above the key $1,600 level. Fueling the strong gains in gold and other markets were encouraging words out of the European Union summit.
As the pivotal two-day meeting in Brussels wound down, global markets and commodities rallied after EU leaders struck a "breakthrough" deal to ease the recapitalization of banks. The plan was aimed at pulling the Eurozone back from the edge of its debt crisis.
While Banks Crumble, The Next Leg Up For Gold Prices Draws Near
Something's afoot in the world of high stakes finance.
The Basel Committee for Bank Supervision (BCBS) is about to decide something crucial to bankers, sovereign nations, and gold investors alike.
As part of the Bank of International Settlements (BIS), the BCBS is reviewing the upcoming new Basel III rules. That may sound arcane to you but I promise it's not.
Though rarely discussed in the mainstream press, the all-important Bank of International Settlements is essentially a global central bank to the world's central banks.
Its goal is ostensibly to provide global stability to the monetary and financial systems.
And in a surprise twist that only a few years ago would have been considered preposterous, the BCBS is entertaining whether gold should qualify as a full-fledged Tier 1 capital asset.
Currently, the precious metal is relinquished to a Tier 3 status, deserving no more than a 50% weighting at that.
Here's why that distinction is important and potentially astonishing.
Achieving Tier 1 status would credit gold with the recognition it's been denied ever since Nixon closed the gold window on August 15, 1971.
In essence, it would mark the official recognition that gold is real money.
But that's not the only reason gold is gaining respect. Other factors are brewing that will set the stage for the next leg up in gold prices.
As Banks Teeter, Gold Gains Respect
One of them is the crumbling state of world's banks. Once unwavering, the trust in these financial ivory towers is precarious at best.
In the last couple of months alone, Greek depositors have withdrawn billions of euros in deposits, as the fear of a "Grexit" looms large.
Not to be outdone, Spain banks have been emasculated by the Iberian nation's own bursting real estate bubble. After denying for weeks that a bailout would be required, officials finally caved to a "Spailout", giving Spain's banking system a 100 billion euro rescue package.
This phenomenon is not exclusive to the Eurozone either.
The Glory Days for U.S. Farms are Far From Over
Many Americans view farming as one of the last bastions of low tech.
How on earth could crops ever compete with that?
Well, as it turns out, there's some pretty cool stuff going on out at the farm, too.
Today's tech-centric farms use remote sensors that "talk" to satellites. They have robots milking the dairy cows. They even rely on unmanned planes that can fly over their fields to help create 3D maps and improve crop output.
Welcome to the future of U.S. farming…
There's a lot going on in the field of precision farming.
All this activity makes me optimistic that high-tech can solve one of the most pressing concerns of our time: feeding the world.
Then again, we are living in the Era of Radical Change. An endless stream of high-tech breakthroughs will greatly improve life for millions of people over the next few years.
I put farming at the top of the list for a very good reason – it clearly defies the "food crisis" doomsayers out there who predict the world will soon outgrow its resources.
They claim that, with population slated to grow from the current six billion to 10 billion by the end of this century, we'll simply run out of food.
I've been hearing these predictions since I was in high school. (And that was a long time ago.) But in actual fact, high-tech has helped farmers greatly increase output for livestock and crops over the last few decades.
The industry is poised to adopt a wide range of cutting-edge high tech that will prove a further boon to farming.
Fact is, this spending occurs at what is already a great time for the sector. U.S. ag exports are booming.
For the fiscal year 2012 that ends this month, exports will total $134.5 billion. You can pretty much bank on that estimate – it comes from the USDA. Consider that in fiscal 2007, U.S. farm exports stood at only $82.2 billion. That means we've seen five-year export growth of 63%.
There's a lot of money to be made in high-tech ag.
Now wonder these hungry startups want in on the action…
Why Crude Oil Prices are in Steep Retreat
Oil prices sank to their lowest level in eight months Wednesday and the trend continues.
Crude oil for August delivery fell yesterday (Thursday) below the $80 line to $78.20 a barrel on the New York Mercantile Exchange.
Oil prices breaking the $80 line can have a psychological impact on traders, which could send oil spiraling even further.
"Oil is participating in the broad decline of equities and commodities," Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago, told Bloomberg News. "We broke an extremely key level for oil, the previous monthly low around $81."
Oil prices fell more than 3.5% the day after the Fed announced a disappointing extension of Operation Twist.
The commodities market, measured by the S&P GSCI Spot Index, entered into a bear market yesterday, off 22% from its highest close of the year on Feb. 24.
Many experts think oil is reaching a bottom – but there are other factors still in play.
Silver Prices Look to Rebound
Silver prices did not fall as much as some expected following Spain's $126 billion (100 billion euro) Eurozone bailout last Sunday. Many investors planned for a spike in the U.S. dollar following the bailout, hurting silver prices.
With everyone's attention focused on the Greek elections this Sunday, silver prices might be the beneficiary of any more turmoil and bailouts overseas. Money Morning Global Resources Specialist Peter Krauth recently weighed in on the subject of silver prices and the Greek elections.
"If Greece is allowed to leave, that will shock Europe into ensuring all is done to keep the larger faltering economies of Spain and Italy from leaving," said Krauth. "If Greece stays, it will likely do so under renegotiated, somewhat relaxed austerity conditions versus those that were required in its last bailout."
"So it's a case of print if you do, or print if you don't," continued Krauth. "There is really little else central bankers know how to do. While nothing's certain in this world, it's a pretty safe bet that raising rates is not something that's happening anytime soon. And that's why the money printing that's likely to come has one antidote: hard assets like gold, silver, oil, and other commodities."
News that Europe's central bankers will work together to stabilize the markets if needed following the Greek elections left silver up 1% Friday to $28.71.
With Europe hinging on Greece's vote this weekend, now presents a good opportunity to take a position in silver.
Everything You Need to Know About Junior Mining Stocks
Let's make something clear up front: junior mining stocks are not for the faint of heart.
Legendary investor Doug Casey calls them "the most volatile stocks on earth."
They can and do regularly undergo massive swings, both positive and negative.
It's a really tough business. Many flame out.
But all it takes is just one 10-bagger to make up for all the dogs in the pound.
Thanks to a new discovery, a takeover bid or full-blown investment mania, it's not uncommon for some of these stocks to return as much as 1,000%, 5,000%, and even 10,000%.
Those are not typos. In fact, there are countless examples.
Aber Resources was a $3 stock in 1993 before it made a big diamond discovery. Four years later, the stock hit $28/share, handing early investors over 900% returns.
Then there's Diamond Fields Resources. Its shares were $4 before geologists made a massive nickel discovery in 1994. Not long after, the stock hit a pre-split equivalent of $160 for a 4,000% return.
That phenomenal 4,000% return was repeated in 2006, when Aurelian Resources Inc. made a high-grade gold discovery in Ecuador. Shares of the junior miner went from $0.89 to almost $40.
So what makes a stock a "junior miner"?
In a pure sense, junior mining companies have market caps somewhere between $5 million and $100 million.
But here's the thing the makes them not for the faint of heart.
Usually, junior miners don't make any money. They just raise money from investors to explore properties for gold, silver, base metals, oil, gas, potash, or uranium, just to name a few.
And even if they make a significant find, junior miners rarely develop it themselves. Instead they sell the project to a major miner, who can more easily raise the required funding and has the experience to build and operate a mine.
OK, so now you're pumped with the idea that one of these little mining companies could help you retire in two years.
And you're right, they can. But not so fast.
The truth is you need to approach this mining subsector with a game plan — an investment "toolkit" if you will – to help you to cast aside the dogs and focus on the "diamonds in the rough."
Essentially, there are four main areas you need to vet in order to decide if a given junior miner is one to add to your portfolio.