when will oil and gold decouple?

[Rajiv]

Re: when will oil and gold decouple?

A good and appropriate video for the preceding conversation!

[Guest]

Re: when will oil and gold decouple?

WTF ... Eh ??!!??

[jimmygu3]

Re: when will oil and gold decouple?

GRG55,

What are those currencies?


Thanks

See the chart below. Looks like Swissies would be a safe play to me, based on GRG55's comment. Though there's no Yuan ETF, Lukester discusses possible ways to buy the currency here.

[zoog]

Re: when will oil and gold decouple?

This thread is unclear on the semantic issue. Is 'when will it decouple' referring to a trading opportunity (much more likely given the overwhelming preferences among iTulipers who watch/analyze short term moves with great enthusiasm)?

Or was the question attempting to establish whether gold and oil have moved in some kind of observable tandem for decades? If that was the question, spending a lot of effort on questioning the linkage evident in the chart below is a task which may provide an uncertain dividend?

It does not take much investigation to ascertain gold has a lot of catch up to do. So there's your potential 'decouple'. But what was the original question - a mere trading insight, or an investigation into the fundamental linkage?

This chart says to me "artificial suppression of the price of gold" since 2000 or so, but it could just be my imagination. This chart only goes into 2005... wonder where cpi-adjusted oil and gold would plot on the chart today. And who knows if aligning them at the 1980 peak is "right" in the first place.

[DemonD]

Re: when will oil and gold decouple?

Gold and oil will not decouple for at least 10 years. Rough estimate.

Consider, if gold goes to 2000, it's likely oil will also be over 200/barrel, which doesn't seem so crazy nowadays.

[cobben]

Re: when will oil and gold decouple?

my question/thought- can gold decouple from oil?

Short answer is, they have never been coupled.

The long statistically supported answer is here:

Oil-Gold and Other Uncorrelated Trades

http://www.thestreet.com/options/fut.../10243313.html

. . .
Gold, as was noted here in May 2003, generally can be modeled well using only two variables: the relationship between expected inflation and expected short-term interest rates and the strength of the dollar.


If inflationary expectations rise, as they have been in the aftermath of Hurricane Katrina, gold prices should rise unless short-term interest rates rise faster. And, all else held equal, a weaker dollar should mean the price of gold will rise in dollar terms.

Modeling the price of crude oil is far more complex . . .

[grapejelly]

Re: when will oil and gold decouple?

Steve Saville has showed that the Euro-US$ relationship highly correlates with the oil price. The correlation is very tight. So as the Euro corrects against the US$, gold and oil prices will fall against the US$ as the Euro falls against the US$.

[raja]

Re: when will oil and gold decouple?

Another thought . . . .

Regardless of what happens with oil or the dollar, if there is a global stocks crash and credit panic, IMHO the world will rush to gold as a safe haven . . . .

[BlackVoid]

Re: when will oil and gold decouple?

A global market crash could see gold and oil plummeting temporarily as well.

I do not see any decoupling either. If oil drops due to severe recession, then producers will surely cut back to prop up the price. Many countries now feel that they have control and they are not afraid to use it.
Also if oil drops then a lot of projects that are feasible at $70+ oil will be axed.

The only scenario where I can see oil prices crash is a world-wide depression that arrives very quickly and drastically. Failing that, oil will rise in price.

As for gold, the outlook is very good. China has opened the futures market for gold, inflation and recession fears drive investors to gold. And there is one VERY VERY important thing that is missed by almost all analysts:

GOLD PRODUCTION HAS PEAKED around 2000
http://en.wikipedia.org/wiki/Image:G...tion_trend.svg

[BlackVoid]

Re: when will oil and gold decouple?

A few more thoughts. Gold production has reached its peak in 2000, the same time the gold bull market has started. Coincidence?

Oil production is on a plateau since 2005, about the same time the oil bull has started. Coincidence?

I think not.

[raja]

Re: when will oil and gold decouple?

A global market crash could see gold and oil plummeting temporarily as well.

Why do you think gold would plummet in a global market crash?

[Andreuccio]

Re: when will oil and gold decouple?

My goodness JK - you must be referring to some other posts. This one was really short. Seems you've chosen to use this one post here on the gold-oil linkage mistakenly, to express pique about longer posts. I mean, how would I shorten it - by one or two (short) paragraphs?

I take it you are 'fatigued' by discussions of emerging persistent tightness in oil markets? I'm definitely in a minority - but I confess I'm a little 'fatigued' by discussions in orbit like moths around a flame, gazing in eternal fascination at imploding mortgages and super-SIV's. I must be the dimwit - everyone else here is absolutely agog on that topic.

I have to say, Lukester, while I read, and usually enjoy, all your short posts, once I see I'm going to have to scroll through several pages worth of one of your posts, I'll tune out too. (And I, like JK, probably am pretty close to your position on Peak Oil.) I just don't have time to read that much stuff. How do you have time to write it? (Not having read it, I'm curious if maybe you just cut and paste from previous rants? ;))

[Jim Nickerson]

Re: when will oil and gold decouple?

Re: when will oil and gold decouple?

How about today 1/10/08.

Bonar down, oil down; bonar down, gold up. An incipient trend?

[Guest]

Re: when will oil and gold decouple?

you just cut and paste from previous rants? ;))

Gee, thanks for the glowing endorsement Andreuccio. Nice to know I'm not regarded as merely blowing hot air. How about we wait for a tidal wave of energy price cost-push inflation clamping down on GDP growth (and our various job prospects), and then we can really get down and chew through all the implications with more personal interest? That's when $150 and $200 per barrel oil really gets 'interesting'!

[Andreuccio]

Re: when will oil and gold decouple?

Gee, thanks for the glowing endorsement Andreuccio.

You're welcome.

Nice to know I'm not regarded as merely blowing hot air. How about we wait for a tidal wave of energy price cost-push inflation clamping down on GDP growth (and our various job prospects), and then we can really get down and chew through all the implications with more personal interest? That's when $150 and $200 per barrel oil really gets 'interesting'!

You might be totally right about peak oil. I just don't have time to read really really long posts. Even EJ's I'll usually set aside, sometimes for a day or two, until I have few free minutes.

BTW, I'm not seriously suggesting you cut and paste. (You don't, do you?) I just don't see how you have time to write so much.