Gold used to track crude oil pretty closely, and both moved opposite to the U.S. dollar. That’s because both oil and gold are priced in dollars. But that special relationship between gold and oil seems to be breaking down.
Why is this happening? Well, we’ve had some disappointing economic news recently. This makes speculators think that oil demand may remain flat for some time to come.
Meanwhile, the U.S. dollar is under pressure. The G7 meeting in Istanbul concluded without any action statement on propping up the deflating greenback. As Andrew Wilkinson of Interactive Brokers said: “invites investors to test the dollar’s lines of resistance in order to see what response, if any, might be forthcoming in the event of a further fall in the value of the dollar.”
So, dollar weaker, crude oil weaker, and gold higher. The weaker dollar may push oil higher, but it’s likely (looking at this chart anyway) that gold is going to outperform oil in the short term.
OTHER NEWS OF INTEREST …
Holdings in the iShares Silver Trust (SLV: 18.22 -0.04 -0.22%) fell by 3.5 tonnes. That’s not much, but it’s something to keep an eye on.
Nouriel Roubinia says that Stocks Have Risen ‘Too Much, Too Soon, Too Fast’ . The market responded by taking off today. Hmm…
And Goldman Sachs isn’t bothering to lobby anymore. I guess why should they — Goldman controls the executive branch anyway, so they’d be lobbying themselves.
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