The Link Between Gold and Oil
Gold and crude oil prices tend to rise and fall in sympathy with one another. There are two reasons for this:
1.Historically, oil purchases were paid for in gold. Even today, a sizable percentage of oil revenue ends up invested in gold. As oil prices rise, much of the increased revenue is invested as it is surplus to current needs -- and much of this surplus is invested in gold or other hard assets.
2.Rising oil prices place upward pressure on inflation. This enhances the appeal of gold because it acts as an inflation hedge |