Are gold and black gold prices related?
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."