Has Gold Bottomed Even Though $100 Oil May Be in Sight?

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...strong demand may remain in place at prices below around $850, even if oil continues to decline, with particularly strong buying power coming in at any attempt by the metal to fall through $800 - which seems to be the current key psychological level on the downside...

Are we beginning to see the uncoupling of the gold price from the oil price? Recent days' trading suggests that we may be at last as enormous demand in the traditional gold-buying areas, India, the Middle East, Turkey together with rising demand in the Far East appears to be underpinning the gold price at around the $800 mark while oil has continued to move back down towards the $100 level.

Since mid July when oil peaked, a chart of the oil price and the gold price could have been virtually superimposed on each other and it would have been tough to tell them apart. This contrasts strongly with the first half of the year when gold drifted back from its $1,000 + peak while oil rose from below $100 up to its peak of $147 in July...

The past week though may have seen a sea change in the gold oil relationship. Initially gold followed the oil price downwards as the latter fell back to below $110, but the huge pent up demand for gold in India and the Middle East, not to mention that which has also been apparent in the U.S., for gold at or around the $800 mark helped the gold price back from the brink while oil is still trending downwards and may continue on this path...

But where does this leave gold? It would appear that the strong demand may remain in place at prices below around $850, even if oil continues to decline, with particularly strong buying power coming in at any attempt by the metal to fall through $800 - which seems to be the current key psychological level on the downside. It is also likely, though, that some of this demand will fall away again should prices move back towards $850 and beyond, although the psychology of the markets could ignore this should the declining price trend be seen to have been reversed...

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