Oil and Gold correlation

Global Markets
1

There is a weak to moderate positive correlation between the oil price and the gold price from 20 months ago. see https://www.macrotrends.net/1334/gold-prices-vs-oil-prices-historical-correlation This means that when the price of oil goes up, the price of gold tends to go up as well, although not always to the same extent. This correlation is likely due to a number of factors, including:

  • Inflation: Both oil and gold are considered to be inflation hedges, and so their prices tend to rise when inflation is high.
  • Global economic growth: When the global economy is growing, demand for both oil and gold tends to increase, leading to higher prices.
  • The US dollar: Both oil and gold are priced in US dollars, so their prices can be affected by changes in the value of the US dollar.
  • Geopolitical events: Geopolitical events can also impact the price of both oil and gold. For example, a war or other disruption in the Middle East could lead to higher oil prices and, in turn, higher gold prices.

However, the correlation between oil and gold is not perfect. There are times when the prices of these two commodities move in opposite directions. This can happen for a number of reasons, such as:

  • Changes in supply and demand: If the supply of oil increases, for example, its price may fall, even if the price of gold is rising.
  • Speculative activity: Speculators can have a significant impact on the price of both oil and gold. If speculators believe that the price of oil is going to fall, they may sell their oil holdings, which can put downward pressure on the price.
  • Changes in interest rates: Changes in interest rates can also affect the price of gold. When interest rates rise, the opportunity cost of holding gold increases, which can make it less attractive to investors and lead to a lower price.

Overall, there is a weak to moderate positive correlation between the oil price and the gold price from 20 months ago. However, this correlation is not perfect and there are times when the prices of these two commodities move in opposite directions.