Crude Oil and Gold: Prime Investment Concerns

It is all absolutely clear that commodity market is a two-way profitable market compared to the stock market which is rather a one-way. An investor can earn in the commodity market when either the price rises or falls but s/he can earn in the share market only in either of the scenario- when the prices rise. The recent trends of the major commodities have been very tumbling and that has led too much confusion among investors regarding the choice of the profitable commodity.

Gold had maintained its reputation of an influencing price since few months, especially due to its higher demand owing to the festive seasons of the Hindu community all around the globe. But now gold has started falling, falling sharply as Federal Reserve is set to reduce the monthly bond purchases, i.e. tighten its monetary stimulus which will decrease the liquidity in the market. In Nepal, the significant decrease might not have been felt but the reason for that is the exchange rate with USD calculated from pegged exchange rate with the Indian currency whose economy is suffering at the moment. Because the unemployment benefit claims also decreased in the USA in an addition to bond purchase program, gold price could not hold itself back at higher prices. One thing is pretty sure that the value of gold now in the global market has been fabricated a lot to reach there. When the prices are decreasing, it is seen that the trading of the gold has increased by upto 70 percent.

After the precious yellow metal, crude oil, also called “Black Gold” is yet another influential commodity these days. With current trends, short positions seem beneficial in gold, other things remaining constant whereas crude oil is moving up and the counter positions look beneficial here. The economy of the USA is set to improve now, thus crude oil is also improving. Analyzing the trends, one can presume that healthy US economy usually have inverse relation to the gold market on the whole whereas the same has a positive impact to the market of black gold.

The price of crude oil is rising but the supply concerns are the major factors of it, the demand side is not at all seen encouraging. But the supply concerns have been dominant enough to uphold the price and the expectations of the investors. The improving economy of the USA is definitely one of the prominent factors but besides that the on-going talks of the world powers with Iran is also encouraging for the investors. China has showed up good signs in energy economy by increasing the exports of refined energy products which has also supported the crude oil prices. The increased consumption of crude as per reports of EIA will definitely boost up the price. Investors should be wary of the impending changes!

(Note: This article was published in Perspectives of The Himalayan Times)