Are gold and black gold prices related?
*Financial Times, by Kevin Morrison, October 7, 2006:
Gold's drop mirrors crude decline
"Oil prices fell about 5 per cent this week in spite of planned
production cuts by the Organisation of the Petroleum Exporting
Countries and the prospect of sanctions against Iran, Opec's second
largest producer, by the US.
Prices bounced in afternoon trade yesterday after the US said there
might be an announcement next week to discuss possible sanctions
against Iran over its nuclear ambitions.
Edmund Daukoru, Opec president, said yesterday he hoped the oil cartel
could reach a consensus on Monday on a planned production cut of 1m
barrels a day.
Some Opec members have already starting trimming supplies. Saudi
Arabia, the world's largest oil exporter, has cut output by 200,000
barrels a day over recent months.
ICE Brent for November delivery retreated 74 cents to $59.26 a barrel
in late afternoon London trade. This left prices down about 5 per cent
on the week, and almost 25 per cent below their peak of $78.60 a barrel
touched in early August.
November West Texas Intermediate fell 76 cents to $59.27 a barrel on
the New York Mercantile Exchange, leaving it down almost 6 per cent on
the week.
Kevin Norrish, energy analyst at Barclays Capital, said the oil price
had continued to slide because the market was confused by the Opec
announcements, which had so far mainly come from the Opec president
rather than the secretariat.
"The fact that Opec wants to make cuts at this juncture implies that
Opec wants a basket price of about $60 to $62, which means about $65 to
$67 for WTI, and this is positive for fundamentals," said Mr Norrish.
UK spot gas prices recovered to 12.25p per therm after dropping into
negative territory in the week after gas started flowing from thenew
Langeled pipeline in Norway.
The drop in oil prices has been mirrored by a slide in gold prices.
Bullion fell $1.85 to $567.00/$567.75 a troy ounce yesterday, down 5.2
per cent on the week and 22.3 per cent below its 26-year peak of $730
in May.
"Oil has become a key barometer of inflation expectations and gold is
also an indicator of inflation expectations, so it is no great surprise
that there is a relationship between the two. It is a surprise that
gold's relationship with oil is stronger at the moment than the
dollar-gold relationship," said Robin Bhar, metals strategist at UBS."
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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