As gold declined strongly yesterday in the face of USD strength, I watched TH after TH tell the audience (pick your TV channel) say that falling equity prices were not consistent with strength in the economy, which was the reason for higher interest rates.

And I continue to say, that the economy is not growing so quickly, but that capital market and real estate market speculators are threatening destabilization of the world financial system, and that Greenspan told it straight out to Congress three weeks ago, without measuring his words this time.

Yesterday, falling gold prices were not alone in the metals group. There were declines across the board. All the metals are trading up and down with probably a 90 percent correlation to the USD, and not to economic drivers.

That's because speculators have taken control.

And where do these speculators work, in the main? They work in the inside trading rooms of Humungous Bank & Broker.

I have made a broad assessment that oil prices would top out in the $54 range because of my assessment of global economic strength. I am interested in assessments of an intermediate-term cycle top for oil (as well as other commodities).

Why are those commodity prices up? I say not because of physical goods demand (consumer or industrial), but because of increasing debt, and that debt has been growing because stock and bond prices and real estate housing prices are being pushed up to inflated levels by the sell-side's appeal to the public's greed.

As soon as the sell-side decides to relax the hard sell, and warn the public of the risks they are taking on, then stock and bond prices and real estate housing prices are going to come down, and with that occurrence, the commodity price bubble will pop.

And with the popping of the commodity price bubble, capital markets will return to normal. The intermediate cycle for equity prices will then complete the pull back (i.e., bear phase), to be followed by a bull phase that will likely see 12,000 for the Dow sometime in 2006.

During that bull phase, as I see it, oil and metals prices, including gold, will be rising. Oil may even go sometime in 2006-2007 to $80, but not before it returns to a cycle low, in the next twelve months, of say $34-$40 " after the commodity price bubble pops.

It's disappointing to me that forex market speculators have taken control of the equity, debt and commodity markets. And for that I blame Humungous Bank & Broker.

BCara@BillCara.com