If you want to follow trends in gold prices, better study the crude oil market. Both gold and crude prices have been going in tandem in the last eight months. Going by the price movement of both commodities, it is clear that when crude price surges, so does the gold price. And vice versa. Based on this trend, bullion traders and investors have started tracking crude prices before buying and selling gold in a large quantity.
"As there seems to be a co-relation between these two commodities, we have started taking crude price into account before placing buy or sell order for gold," Monal Thakkar of Amraplai Industries, a leading bullion company, said. Crude prices, of course, have also started influencing the Indian bourses, albeit in an inverse manner. Whenever crude goes up, it adversely affects the market sentiments.
"The inverse relationship between crude prices and the stock market has been established in the past few months. But one reason for gold price to move in tandem with crude price could be inflation. Upward movement of crude price leads inflationary pressure in the economy and investment in gold is traditionally considered as hedge against inflation," C Jayaram, executive director, Kotak Mahindra Bank, said. Another reason can be the US dollar movement. Increasing crude price makes the US dollar weaker and a weakening dollar leads to higher exposure in gold.
So crude prices make an impact on gold via the dollar price movement. It may be pointed out that there was no direct correlation between crude and gold prices in the previous years. "The fact that this year gold price is moving in tandem with crude is prompting investors to take long positions in gold, on the assumption that crude prices are bound to rise further," Anupam Kaushik, vice-president, Anagram Comtrade, said.
"As there seems to be a co-relation between these two commodities, we have started taking crude price into account before placing buy or sell order for gold," Monal Thakkar of Amraplai Industries, a leading bullion company, said. Crude prices, of course, have also started influencing the Indian bourses, albeit in an inverse manner. Whenever crude goes up, it adversely affects the market sentiments.
"The inverse relationship between crude prices and the stock market has been established in the past few months. But one reason for gold price to move in tandem with crude price could be inflation. Upward movement of crude price leads inflationary pressure in the economy and investment in gold is traditionally considered as hedge against inflation," C Jayaram, executive director, Kotak Mahindra Bank, said. Another reason can be the US dollar movement. Increasing crude price makes the US dollar weaker and a weakening dollar leads to higher exposure in gold.
So crude prices make an impact on gold via the dollar price movement. It may be pointed out that there was no direct correlation between crude and gold prices in the previous years. "The fact that this year gold price is moving in tandem with crude is prompting investors to take long positions in gold, on the assumption that crude prices are bound to rise further," Anupam Kaushik, vice-president, Anagram Comtrade, said.
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