Oil Price Fluctuations Spurring Gold Demand
In a normal world, falling prices of oil would be a reason to celebrate because it has a way of reducing the cost of various essentials across the board. It is something that anyone knows can help to give the economy a boost. Rather, the current sorry status in the world is such that fluctuating oil prices are already causing fear among us that loans could be defaulted collapsing the financial system as we know it, a reason why major stock markets around the world are already buckling.
In fact, crude oil futures had started going up a couple of times and lots of analysts predicted inflation could go up than most had previously anticipated, something that would end up eroding the value of cash money before plummeting the attractiveness that come with gold as the way to hedge. As the fluctuations currently experienced in the current oil market continue as they have been, volatility of gold prices has continued to be experienced for about nine months. Essentially, it is commonplace for commodity traders to always track the prices of energy due to their direct connection to cost of goods used by consumers, thus inflation, with the link very strong currently than before.
In recent months, oil prices have continued to dip mostly as a result of world markets being expected to be oversupplied between now and in days to come after the decision by Opec to throw away the idea of cutting the production of oil. In the last week, crude oil futures had started going up once it was clear from a report by the US government that oil inventories had started declining. As such, the rise in prices of crude oil has started pushing gold prices up. In fact, in the United States, a lot of solid gold buying has already been reported.
Across the UK, analysts believe Gold is looking up due to the changes in oil prices since there is no other fiscal or rational reason for this rising trend. Nonetheless, even as the cost of gold remains over $1,200 for every ounce troy in London, UK, trading, the released changes in United States’ jobs data is expected to have some influence on the cost of gold.
This is due to strengthening of the US dollar, which inadvertently reverses the recent gains gold has made in terms of value. On the other hand, dipping oil prices are not good news for the US oil industry whose cost is very high and it is possible for oil shale and fracking operations to be considered as uneconomical in a very short period going into the future.
Changes in oil prices could bring about a world stock market crash that might give the World Central Banks the excuse to bring in the Global Coordinated-QE programme that seeks to ensure interest rates remain at zero, henceforth, in the process rescuing the global economy, something that has seemingly been in the works for years. It might even lead to the inauguration of the first ever Global Central Bank. Of course, all these could play out in the next few months if oil prices continue their downward spiral.