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Gold differs significantly from oil

Harry November 10, 2024

Gold has been one of the biggest gainers of 2024 and continues to outperform other commodities that are showing signs of slowing, despite declining global inflation rates.

Gold prices are hovering near all-time highs of $2,700 per ounce despite multiple bearish sessions triggered by the election of Donald Trump in the United States. However, many other commodities are not performing at the same level.

yellow gold and black gold

Juan Carlos Artigas, Head of Global Research at the World Gold Council, said research shows there is no long-term relationship between gold and oil. However, the strength of the US dollar always affects commodity prices, causing many different assets to make similar moves from time to time.

“So, while oil prices do not ’cause’ gold prices to rise or fall, the economic environment that leads to a rise in oil can also cause gold prices to rise,” he said.

Gold and oil prices diverged noticeably in the second half of 2024. (Source: TradingView)

Correlation tends to fall in weak economies

While the long-term correlation is close to zero, when the correlation between gold and oil weakens and prices diverge, history shows that this can be an indicator of a weaker economy.

This decrease in correlation occurred during the 2008 economic crisis, the dot com bubble, and even in the late 1970s and early 80s.

“Oil and gold tend to perform well during periods of high inflation, albeit for different reasons,” Artigas said. “High oil prices can push consumer price baskets higher, resulting in higher inflation. When high inflation persists, driven by commodities or other factors, investors seek hedging, often driving up investment demand – and the price – of gold.”

Gold and oil prices did not show a significant correlation in the long term. (Source: World Gold Council)

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This article is for informational purposes only. The opinions and analyzes contained herein are those of the author and do not constitute financial advice. Jerusalem Post (JPost.com) does not endorse or recommend any investment based on this information. Investors should consider their financial situation, investment objectives, and risk tolerance before making any decisions. It is recommended that you consult a qualified financial advisor. JPost.com is not responsible for any investment losses resulting from the use of this information. The information provided is for educational purposes only and should not be considered trading or investment advice.