Recently, I have heard a lot of arguments about the correlation between major financial instruments and I decided to make special report for you to give some idea about their actual relationships.
For today’s analysis, I chose Gold, WTI Crude Oil (“black” gold) and the Prime Currency’s DXY Index (King). I would guess all of you track these instruments from time to time to check the precision of your financial “compass”. Most important here is to find out how sensitive Gold price is to fluctuations in Oil and Dollar value. To check that, let’s get down to our comparative historical dynamics charts depicted in different time periods.
The 90’s look flat compared to wild present days, only Oil managed to make a huge 80% spike in 1990, rising from the $20 level up to the $40 area. During those years, Gold and the Dollar index showed good and quite constant negative correlation, making opposite curves and charting ellipses. It worked nicely up until the crisis 2008 year, both instruments, by turns, had been changing sides and keeping an accurate inverse relationship. Oil is less predictable, first, it was between Gold and the Dollar index correlation, but still positive with Gold and negative with the Dollar index, then in 1996 and in 1999-2001 it was in direct relationship with the Dollar index but rest of the time Oil was back to normal inverse relationship, therefore bipolar is the right definition for Oil.
Lucky and Intelligent Trades!
Aibek Burabayev
INO.com Contributor, Metals
Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
