Gold Prices Coiling Up for Breakout, Crude Oil Pierces Trend Top
Earlier this week we witnessed a major reversal in the stock market – breaking gold prices in the process. We also saw a reversal in the trading trend of crude oil, as the price of oil continued to rise as the global supply was reaching its limits.
After reaching an all time high, crude oil prices have fallen. The price continues to be affected by the price rise of gold, which is a popular metal. While gold prices are looking rather strong, many traders and investors are concerned about what is going to happen next.
This is even before we get to the impact of rising prices of crude oil on the gold market. It has been a consistent trend that when the price of crude oil goes up, so does the price of gold. What we are witnessing now is a return to trend-following.
One of the reasons for the price of crude oil to increase is to cover up for the growing shortage of crude oil supply. The current oversupply of crude oil has caused the price to increase to reflect this fact. As a result, the oversupply of crude oil has caused prices to rise in anticipation of a stronger supply response.
This means that we can expect to see further increases in the price of oil as supplies expand. This, however, is a very short-term thinking perspective. As crude oil supplies are only likely to increase, the price is likely to continue to rise.
The rise in crude oil prices has caused other metals to come under pressure. Gold is definitely the major one, but it is not the only one. Silver prices are also increasing. The only thing that could stop this upward swing in the price of gold is a reversal in trend.
Gold is affected by other factors besides the movements of the price of oil prices. Here are some of the key drivers that cause gold prices to move higher or lower, based on the price of crude oil.
When oil prices start to increase, we often see an acceleration in the rise of gold prices. Similarly, when crude oil prices are rising, silver prices are likely to increase as well.
As we see the Canadian dollar gain value against the US dollar, we might expect this to have a spillover effect on the price of gold, too. Over the next few years, the dollar will continue to strengthen against the Canadian dollar, and this might cause a new trend towards strengthening the value of the American dollar.
Another thing that makes crude oil prices higher is the fact that prices are higher due to demand rather than supply. When oil prices are high, as they are right now, then people have more money to spend on more items that are made from oil.
As a result, the demand for oil may be continuing to increase even if the supply is still being increased. As we see the price of crude oil continuing to increase, the demand for oil will continue to increase as well.
It appears that the price of crude oil is going to continue to rise, but this is because of what is happening with the oil demand, rather than what is happening with the supply of oil. To be able to buy the best deal possible, we need to look at both sides of the story – whether supply or demand.