Gold no longer follows crude price

AHMEDABAD: If you are tracking crude oil prices to take a call on gold investments, then think again. Gold and crude prices, which moved in tandem for long, have been moving in different directions since the beginning of the year.

This month, crude oil prices in global markets dipped 17.5% to $51.99 per barrel , while gold prices went down marginally from $638 to $636.1 9 per ounce. However, gold prices witnessed a correction during second week of the month and bounced back to the previous level.

During most of 2006, gold and crude oil prices had been going in tandem. Last year, whenever crude prices surged, gold followed and vice-versa .

The recent price trends in both commodities clearly indicates that tracking crude oil prices for investing in gold may not be a sound idea. Considering this, many leading bullion traders have changed their buying and selling pattern of the gold.

���We used to track crude oil prices before taking any decision regarding gold trading. Now, we are taking the decision based on the fundamentals of the commodities and dollar price movements,��� Monal Thakkar of Amprapali Industries, a leading bullion firm said. The sudden change in price movements in both the commodities is mainly attributed to change in the investment patterns of the large fund houses globally.

���Though investment in gold is still considered a hedge against inflation, gold has also emerged as an individual asset class due to various kind of demands,��� said Navin Mathur, head, commodity division of Angel Broking.

According to Mathur, with coming of exchange traded funds for precious metals and changing demand pattern, dependence of gold prices on factors like crude prices and dollar rate is expected to reduce. ���However, theoretical aspects such as dollar rate and crude rate can remain governing factors for gold price in the shortterm,��� he added.