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Tuesday, 24 January 2012

Oil price linked to gold price?

Iran's linking of oil to gold is an important development.  An increased correlation between the oil price and a rising gold price over the longer term could result, if oil trading becomes increasingly denominated in gold.

India, China, and Russia, and other oil producers and consumers, continue to diversify their trade away from the US dollar global reserve currency, whose significant devaluation remains assured by perpetual quantitative easing.  The US dollar continues to lose its status as the global reserve currency.  China, the second largest economy, continues to make bilateral Chinese currency exchange agreements with its trading partners to reduce exposure to the US dollar.

Oil producing stocks are on my long term investment watchlist.  If the oil price is linked to gold then the oil price may well rise over the longer term with the gold price.  Oil, and oil producers, could provide a hedge against US dollar inflation.

1 comment:

  1. is this similar to the events that drove the price of gold when it was $250 an once?