How Rising Oil Costs, Inflation Are Set To Directly Impact Gold Prices

May 7, 2018

London (May 7)  Impact of rising oil prices is predicted to increase inflation and therefore has a direct effect on gold

Flaring geopolitical tensions in Middle East together with the predictive decline in US stockpiles are boosting oil trade near $70 a barrel. In particular, a jump in oil can impact gold through inflationary expectations. Oil is not the only determinant but generally is the leading indicator of inflation.

Rising yields tend to affect gold prices as they increase the opportunity cost of holding onto the gold, this could result in gold stagnating in the short term, however if inflationary predictions become a reality, gold could be the big winner to act as an inflation hedge.

The U.S. recent softening stance against China and Russia is also boosting sentiment among oil investors.

Russia purchases 300,000 ounces of gold in March

Russia is leading the trend of countries diversifying into gold as many countries seek to protect themselves from likely devaluation of the US dollar. This is very evident as countries look to strategically store gold reserves.

Russia’s position with gold has taken it above China’s holdings. Turkey seems to be teaming up with Russia by removing all gold bullion reserves held in U.S, which is a clear move against US dollar supremacy. In recent times there have been movements of western nations such as Germany, who have made strategic moves to bring some of their reserves back to Europe.

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