Gold prices rallied Wednesday to settle at $860 an ounce after a weak dollar coupled with a new oil record-setting of $100 a barrel spurred the demand for the precious metal. The surge in oil prices helped boost the price of gold as investors altered resources to the precious metal, often seen as a safe haven against inflation and geopolitical uncertainties.
Worries about the global political instability especially after the recent assassination of Pakistani opposition leader Benazir Bhutto, have added to the metal’s allure. And despite today’s drop in prices, in my prospect, worries about energy prices and inflation will power demand for gold and hence will contribute in the increase of prices for the metal.
As mentioned above, oil prices hit $100 a barrel this month for the first time amid perceptions that worldwide demand for oil and petroleum products will outstrip supplies. Along with violence in Nigeria yesterday that sure help nudge crude oil during the session yet ended with a decline. Today oil prices started the session declining supporting the slight decline we see today in gold prices; however it is now starting to move to the upside yet calmly recording at the hour of this report a high of $96.24 per barrel.
However, the booming global economies such as China and India will continue to send energy prices soaring, while tensions in oil-producing nations such as Nigeria and Iran worries investors and hence persuade speculators to drive prices even higher.
A major driver behind gold’s advance has been the dollar’s steep drop against majors especially the drop against the Euro. A cheap dollar can make commodities more attractive as an alternative investment and can also raise demand from foreign buyers as their currencies gain strength.