Oil Prices Rising Effect on Gold

With Oil Rising Rapidly, Gold May Do The Same

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Recently, the price of oil had crossed $100 a barrel following Russia’s invasion of Ukraine. Soon afterward, we saw the price of gold begin to rise towards its all-time high. Since both of these assets are commodities, one would wonder if oil prices have some sort of effect on the price of gold. With oil rising in an unbelievable way, becoming educated on a safe haven asset like gold is imperative now more than ever. After this article, make sure to call the executives at Allegiance Gold at 844-790-9191 to receive a FREE Gold IRA Guide and education on topics that could affect your finances. Here, we will take a look at the historical relationship between oil and gold prices.

Working Together in the 1970s

Looking at the history between oil and gold can be a little tricky for a couple of reasons. First of all, gold has been money for 5,000 years. In fact, it is the oldest asset that is still tracked today. On the other hand, oil has only been traded for the past 160 years.  Therefore, we have some limited data. Additionally, there was a period between 1933 and 1970 where the private ownership of gold was illegal and the price was fixed at $35 per ounce in the United States.

That being said, we can look at data from 1970 onward to track the relationship between oil and gold. During the 1970s, we saw an explosion in the price of oil with OPEC (the mid-east oil cartel) raising the price of the commodity. With the rising of oil came inflation. With inflation, we began to see a shocking rise in the price of gold, silver, and other commodities. In fact, the price of gold rose from $35 per ounce in 1970 to over $500 per ounce by the end of the decade. During that time, we also saw a rapid rise in the price of oil.

Gold and Oil’s Multi-Decade Bear Market

During the 1980s, we saw the price of oil peak and begin to fall. Along with the falling price of gold, we saw the price of oil come down as well. In fact, the 1980s and the 1990s saw a multi-decade bear market in the price of both oil and gold. In fact, the price of both of these assets remained depressed until the dot com crash of 2000. 

Gold and Oil’s Rise During the 2000s

After their low-decade bear market, both gold and oil came back with a vengeance. In fact, we saw oil at an all-time high of $147.27 per barrel in July of 2008. During the same decade, the price of gold rose from a low of $250 up to $2,000 per ounce. At the end of the decade, the price of both assets began to fall as a new bull market in equities took off.

The Amazing Correlation of Oil and Gold

For the past 50 years, we have seen both oil and gold move together rather than reliability. Now, the question is which asset causes the other to move? Does a rise in the price of oil cause gold to move higher? Perhaps a rise in the price of gold causes an increase in the oil price? The real answer is that both gold and oil are more affected by economic and geopolitical forces. When there is a sort of economic or political uncertainty, both oil and gold will move higher. That is because gold is a stateless store of wealth and oil is the world’s most popular source of energy. In bad times, both of these assets became immensely valuable. 

How to Use This Correlation to Your Advantage

As an investor, it is important to know where to find opportunities. If you focus exclusively on stocks, then you will miss out on bull markets in other sectors. Therefore, it is important to be aware of gold and oil movements. One smart way to invest is to use both gold and oil as a hedge against your equity portfolio. You can invest in oil through an oil futures ETF such as The United States Oil Fund (USO). You can also invest in gold by purchasing physical gold bullion or purchasing shares in a gold ETF such as the iShares Gold Trust (GLD). 

Watching Oil Prices and Gold 

Be sure to carefully monitor the price of oil. No matter where the price of oil goes, the price of gold may be sure to follow. We understand the need to be informed and updated with the trending news. The executives here at Allegiance Gold stay up to date with all global news that may affect you. From rising oil and gold prices to the current turmoil and inflation rates rising, our team will make sure to keep you in the loop with your best interests in mind. Call 844-790-9191 to find out more on the rising price of gold, and make sure to ask about your FREE Gold IRA Guide.