Oil is hitting fresh 2017 lows in recent trade, and it is certainly having an impact on equities. “Black gold” traded below the $43 per barrel level today, and all signs appear to be currently pointing to ongoing downward pressure.
Oil can potentially be a good barometer of overall economic activity, and the recent slide in prices to their lowest levels of the year cannot be ignored. Continuing worries over a global oversupply are preventing any significant rise in prices, and until that oversupply is consumed prices may remain very much on the defensive.
We spoke in previous posts about the ongoing lack of any significant inflationary pressures, and lower crude oil is just another sign of weak inflation.
The energy sector makes up a significant portion of the stock market, and lower oil prices can eat into producer and refiner profits, dragging down the entire market in the process.
Interestingly, prices have remained weak in spite of production cuts by OPEC. This begs the question of whether this is simply a case of a massive oversupply or if weak demand is also playing a part. You might expect that in the face of strong economic growth and activity, oil prices would at the very least remain stable.
That has not been the case thus far…
Lower crude can potentially keep inflationary forces further at bay, and with inflation under control the Fed may not have to be as aggressive as originally anticipated with regards to monetary tightening.
In fact, ongoing weakness in the energy sector could potentially even be the stock market’s downfall. If oil is not able to stop the bleeding, it could eventually cause widespread selling in energy shares.
This is important because oil has often been the leader when it comes to stock market gains or losses. Right now, markets are by some estimates very overstretched as it is. Another major move lower in crude could be the catalyst for a market top.
We have also stated a case for the Fed to raise rates slightly, only to have the ability to lower them again at a later date. Lower energy costs and a lack of inflation would seemingly point to such a potential scenario.
The oil market could be providing a big, bright warning sign to equity investors right now.
The question is: Will you heed its warning?
Given the fact that the stock bull has run for nearly a decade, and given the fact the nation could be approaching the next recession, now may be the ideal time to look for opportunities to diversify.
Lower stocks, economic recession and ongoing low interest rates could all be considered bullish for gold and other precious metals. In fact, gold could potentially be on the verge of a multi-year bull market as stocks get closer and closer to an eventual reversal and protracted bear market.
Adding gold and other physical metals to your portfolio has never been easier, and today’s prices could potentially not be seen again.
Speak with an Advantage Gold account executive today about the potential benefits of gold ownership. Our account executives are here to answer your questions and walk you through the process step by step. We can even show you how to add physical gold to your holdings using your IRA account.
Don’t ignore the writing on the wall. Explore your options for portfolio diversification with physical gold today. Call Advantage Gold at 1-800-341-8584 to get started.Tags: advantage gold, black gold, energy, inflation, oil, opec, oversupply