Oil Is a Commodity, Gold Is Money - Decoupling Will Happen

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Those who mistakenly perhaps see the oil and gold prices linked as indicators of dollar weakness, may mark the gold price down as oil falls back, but this should be shortlived. Oil should be subject virtually in its entirety to the laws of supply and demand.

With the oil price falling more than 10 percent over the past few days - a level sufficient to be termed a ‘correction' - the gold price has also suffered, but not nearly to the same extent percentage wise, at least so far. This could be taken as an indication of a beginning of the mooted decoupling of gold from the oil price which would have to happen if gold is to be the answer as a true hedge against inflation and economic carnage.

In reality though, oil is a commodity and just like any other commodity is primarily subject to supply and demand considerations, while gold is, despite the views of some figures in the Central Banking community, a currency. Gold is still ‘money' as far as much of the world is concerned and thus behaves differently from most other metals...

Those who mistakenly perhaps see the oil and gold prices linked as indicators of dollar weakness, may mark the gold price down as oil falls back, but this should be shortlived. Oil should be subject virtually in its entirety to the laws of supply and demand. Gold remains, in our view, in a different category altogether, although not totally immune to supply/demand balance factors.

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