Rick Rule - Much Higher Gold Prices Because of Move in Oil
With oil above $100 and gold near all-time highs, King World News interviewed Rick Rule, Founder of Global Resources, now part of the $8 billion Sprott Asset Management. When asked about the move in oil, Rule remarked, “The markets are too tight to take any shocks. I think this move in oil was inevitable, because the balance between supply and demand was too tight. There is a whole bunch of oil production controlled by national oil companies and many of those countries have diverted too much of that cash to domestic spending, without leaving capital to fund their existing infrastructure to allow for continued high production levels.”

Rick Rule continues:

“As a consequence, world export supplies should shrink over the next five years as countries like Mexico, Venezuela, Peru, Indonesia, Ecuador and perhaps even Iran cease to be exporters. This inherit tightness can’t accommodate political disruption in Middle-East supplies.

I think Brent/WTI divergence is an important story. It shows that the US is becoming a less dominant world economy and that the WTI serves a regional market, with Brent becoming the global benchmark.

The bottom line is that the increase in energy prices will have inflationary impacts. The US government wants to report the CPI excluding food and fuel, sadly people eat and drive and it does impact people’s cost of living.

Further, the political response to the economic shock engendered by higher energy prices will doubtless be more quantitive easing. The markets response to central bank counterfeiting will likely be much higher gold prices.”

Rick Rule called for some geopolitical event in the Middle-East to cause the price of oil to take off to the upside in his last King World News interview - Nice call Rick.

Eric King

KingWorldNews.com