Stock Market Horizons: Gold $3,000, Oil $70

In the last two decades, even though gold prices have dwindled from $850 to $350 an ounce, there are still market gurus who predict gold price to hit $3000 an ounce. Hecla seems to be quite bullish about the future.

With oil prices fluctuating between $40 and about $60 a barrel, the industrialized nations are totally dependent upon the foreign oil supply. The US government has a deal with the Saudis for that very purpose. The Saudis have to keep the oil flowing and we, in turn, will keep the monarchy in power. This is a healthy arrangement for both parties in the short run.

I have a serious problem with the $3000 an ounce gold price. If this prediction were to come true, what shall be the interest rate? Can someone answer it for me?

In contradiction to this Saudi deal, the Bush Administration is committed (not officially) but morally, according to the pronouncements of G.W. Bush to stabilize the entire Middle East region by establishing democratic systems of government in a decade.

We can't have it both ways. We have not succeeded to find any viable sources of alternative energy thus far. The environmentalists won't let us dig for oil and the car industry has invested millions in the development of better and more energy efficient cars.

At $3000 an ounce for gold, we must maintain an interest rate of at least 20% (my guess). The million dollar question is: what will happen to the mortgage business and the housing industry as a whole? The rate of inflation at present levels will not allow new home buyers to pay their mortgages. May be there will be a sudden boost in the GNP. But how? What will happen to the money supply? Are we going to keep on printing money as we do now?

This was one scenario thus far according to bulls. But the bears view the whole problem differently.The Oil Price DilemmaIn 2004, we saw a big spike in the oil price. Some analysts today are even forecasting the price increases to more than $60 a barrel in 2005 or even $75 to $80 in the event of a major supply disruption.

The growing demand for oil specially from the U.S. and China underlies most of the price increases because oil is priced in dollars around the globe. A weaker dollar means less revenue for oil producers.

European Central Bank President Jean-Claude Trichet cited oil prices as one threat to economic growth. The world currently consumes more than 84 million barrels a day of oil. OPEC currently is producing 29 million barrels of oil everyday, roughly a third of world supply.

Are we going to be forced to pay $60 a barrel for oil? Does this mean that the OPEC nations can or may dominate the global economy thru oil? The banking industry has been in a state of turmoil for the last two decades. There are a few reasons for this. The illegal but quite prevalent Havala system of money exchange accounts for part of the problem. The next puzzle is the drug trade funded and operated under cover by some governments in power. The money from such trades (trillions of dollars) is laundered thru banks illegally. Civilized nations are supposed to be ethically run, but are they when it comes to large sums of money?

The rules of the banking industry are too old to fit in the fast changing climate of money transfer from the sale of oil and illegal drug sales. No one has come upon a solution thus far. The rate at which the oil and drug trade money changes hands is much faster than the rate at which the banks can successfully launder it legally. It means that trillions of dollars in cash remain unaccounted for. With that kind of cash it is not difficult to buy weapons or anything you like to topple a government with good planning.

We had hoped the Caspian Sea oil to flow to the US, but that has not happened yet. The Iraqi war and the Afghanistan situation have both tilted the balance of power in the civilized (industrialized) world. But in whose favor?

The purchasing power of the US dollar continues to decline. The global political instability continues to remain a problem to contend with.

The vast changes in the crust of the earth have caused the ocean levels to rise and fall in some places. This will bring about dramatic changes. All these factors create a very flexible environment and we will see the changing weather patterns eventually bring about changes in the climate and vegetation in many countries.

What does the wave theory say about the stock markets of the future and the world economy as a whole? The mass migration of peoples of the earth will be the next step. This can mean that certain governments will lose support of their people and thus fall from power.

We can expect the stock markets to become more volatile than they have ever been. Fortunes will be made and lost. Let me remind those who dream of a $3000 an ounce gold price that the gold smugglers can bring tons of it from the Far East and South American routes, buy the most prestigious US properties and create chaos in the world economy. If this happens, you will not care about the DJIA. Why? Because it will cease to exist. We are talking about a very different ball game.

Ninety percent members of the UN are dictatorships. And they would not like to lose power should the gold price rise to $3000 an ounce. I quite forget that the US economy is not backed by gold. How can we have a gold standard? Well, we can't for the time being. What's your opinion?

Ostaro is a veteran media personality and has appeared hundreds of times on television,radio and in print media. A film maker, he frequently appears on radio nationally.He is the host/producer of the Ostaro Show (Time Warner and RCN Cable TV every other Fri and Sun in NYC) featuring the best in celebrity horoscopes. He appeared as a Swami in Woody Allen's 'Stardust Memories' and is a member of Screen Actors Guild. Listed in Who's Who in America, he is a positive thinker and the author of the "Art & Craft of Success: 10 Steps," published by Svarg Syndicate Inc, NYC. Mr. Ostaro is a Premier Hindu Astrologer of New York City, he is a Kentucky Colonel, a Toastmaster (ATM), and an investment adviser. http://www.ostaro.com; ostaro@ostaro.com.