Economic Analysis of Gold and Oil Gain Introduction The paper aims at finding the views about different experts regarding gains in crude oil and goldthrough three articles found online from a well known newspaper or at some popular website. First in the series is an article published in DailyMarkets. com written by Przemyslaw Radomski. The article attempts to find out if there is any relationship for simultaneous upward movement between the of crude oil and gold prices. The article states that gold and crude oil are commodities like other commodities in the market and as such there is no direct link in their price movements.
Usually, bull markets set their pace across numerous commodities and that is the only reason for their upswing in the market simultaneously. The gold and crude oil will gain or lose in the market according to their respective positions in the market. Tops made in gold does not correspond to tops in crude oil price is the conclusion made by the writer. An article published in Guardian UK, under the title "Oil and gold prices volatile after Thursdays plunge", speaks about the drop in oil prices that took place during the last week of May.
The specific mention is regarding US economy. The paper opines that boom in commodity market is coming to an end. The unemployment rate is close to 8.8 percent. In view of the depressed US economic scenario, the paper made a special mention about the crude price going as low as $94.3 a barrel. Even Brent crude was down to $105.87 a barrel and crude oil prices fell successively for 5 days in a row.
At the same time, gold traded at $1481.69 an ounce after spurting to $1,489.79 earlier indicating a downward trend. The article mentions about the growing speculation that due to slump in US economy the boom period in commodities such as gold and crude oil will end soon. In another article that appeared in International Business Times with the heading "Crude Oil to Rise, Gold to Fall as Wall Street Recovery Continues", the writer Ilya Spivak mentions that crude oil prices are following the trend of S&P 500. The article also makes a note about chinas New Yuan Loans that was at its lowest in seven months while money supply was at its lowest.
It also took an optimistic note that china will not take any stringent steps to slow down the economy and that will certainly help to boost the global recovery. The writer also hopes that crude oil will go strong. Taking a cue of technical factors in gold, writer mentions about the inverse relationship that exists between S&P 500 and gold. Writer also speaks about negative RSI divergence indicating a bearish trend in gold in near future. Conclusion Experts do not agree in unison that crude oil and gold will continue to gain in coming months.
Many link them with the recovery of US economy and unemployment rate strongly. Any remarkable recovery in US economy will spurt the crude oil price but decline in the gold price. Gold is currently used only as a hedging commodity against dollar because its value is getting eroded against world’s major currencies. Currently, Dollar does not hold confidence of the world as a robust currency and that is the only reason for gold to go up.
Crude oil price on the other hand is strongly linked with the growth of world economy and any improvement in global economy will spurt oil prices. References 1. Radomski, P (2011), Crude Oil, Gold and Silver – Important Timing Connection (2011)? August 14 2011, http: //www. dailymarkets. com/economy/2011/03/12/crude-oil-gold-and-silver-%E2%80%93-important-timing-connection/ 2. Kollewe, Julia (2011), Oil and gold prices volatile after Thursdays plunge, August 14 2011, http: //www. guardian. co. uk/business/2011/may/06/commodity-rebound-oil-gold-us-jobs-numbers 3. Spivak, Ilya (2011), Crude Oil to Rise, Gold to Fall as Wall Street Recovery Continues, August 14 2011, http: //in. ibtimes. com/articles/196881/20110812/crude-oil-to-rise-gold-to-fall-as-wall-street-recovery-continues. htm