Gold snap ties with crude & euro, charts independent course now
Gold has snapped ties with its traditional partner crude, at least for now. Whenever crude had gone up in the recent past, gold had followed.
By Deepa Krishnan, TNN |
MUMBAI: Gold has snapped ties with its traditional partner crude, at least for now. Whenever crude had gone up in the recent past, gold had followed. However, this correlation has weakened in the last one year. Gold is relying more on its inherent strength, and taking cues from the dollar which looks to be strengthening. Normally, when the dollar is strong gold moves down.
A look at the correlation between gold and crude in the last year shows a 0.4 correlation on a scale of 0 to 1. As the dollar gained against the euro, the positive gold-euro correlation was also weaker at 0.44 during the same period. Krishna Nathani of India Bullion said, “Gold is now moving on its own strength, and not taking cues from its traditional partners crude and euro.”
Meanwhile, according to a study by MAPE Admisi Commodity Research, the dollar index had recovered in the past week from its two-year low to 81.79 indicating an inherent strength in the greenback.
During that period, gold had fallen from $693 to $670 an ounce. With a marginal weakness in euro and Japanese yen, further recovery is expected in the US dollar. With a negative dollar-gold correlation, “gold is expected to correct further in the short-term,” the report said.
Oil economics plays a big role in determining the link between gold and crude. Bullion analyst Bhargava Vaidya, said, “When crude price crosses $70 per barrel, then gold and crude will move in tandem, keeping the positive correlation high. Currently, gold is looking at currencies.”
Meanwhile, in the US gasoline market, stocks are expected to have fallen further ahead of the peak summer demand. This would keep crude prices up. Gold, on the other hand, has fallen due to a lull in physical offtake in India following the surge in purchases during the auspicious occasion of Akshaya Tritiya. In other Asian markets, a weaker yen has led to profit taking among gold investors, bringing down the price.
In the past week, between April 23 and May 1, crude has gained about 4% to $66.65 on Nymex. During the same period gold fell 2.6% on Comex to $680.20 per ounce. On MCX, gold saw a 3.8% fall to Rs 9,170 per 10 gm. Surprisingly, the May crude contract on MCX did not see much volatility, and moved between Rs 2,707 and Rs 2,710 a barrel.
A look at the correlation between gold and crude in the last year shows a 0.4 correlation on a scale of 0 to 1. As the dollar gained against the euro, the positive gold-euro correlation was also weaker at 0.44 during the same period. Krishna Nathani of India Bullion said, “Gold is now moving on its own strength, and not taking cues from its traditional partners crude and euro.”
Meanwhile, according to a study by MAPE Admisi Commodity Research, the dollar index had recovered in the past week from its two-year low to 81.79 indicating an inherent strength in the greenback.
During that period, gold had fallen from $693 to $670 an ounce. With a marginal weakness in euro and Japanese yen, further recovery is expected in the US dollar. With a negative dollar-gold correlation, “gold is expected to correct further in the short-term,” the report said.
Oil economics plays a big role in determining the link between gold and crude. Bullion analyst Bhargava Vaidya, said, “When crude price crosses $70 per barrel, then gold and crude will move in tandem, keeping the positive correlation high. Currently, gold is looking at currencies.”
Meanwhile, in the US gasoline market, stocks are expected to have fallen further ahead of the peak summer demand. This would keep crude prices up. Gold, on the other hand, has fallen due to a lull in physical offtake in India following the surge in purchases during the auspicious occasion of Akshaya Tritiya. In other Asian markets, a weaker yen has led to profit taking among gold investors, bringing down the price.
In the past week, between April 23 and May 1, crude has gained about 4% to $66.65 on Nymex. During the same period gold fell 2.6% on Comex to $680.20 per ounce. On MCX, gold saw a 3.8% fall to Rs 9,170 per 10 gm. Surprisingly, the May crude contract on MCX did not see much volatility, and moved between Rs 2,707 and Rs 2,710 a barrel.
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