Gold Continues Climb Over $1,200 as Oil Worries Persist

Tuesday January 6, 2015, 4:00pm PST
By Nick Wells+ - Exclusive to Gold Investing News

Gold continued its rise from the ashes as it trended upward over the $1,200-per-ounce mark on Tuesday.

The yellow metal has been buffeted over the past six months after rising on the back of military and political concerns about Russia and Ukraine in the first half of 2014.

At this point last year, gold was at $1,238, and would go on to hit a year high of $1,379 in March.

However, since June, the commodity has been in free fall, posting occasional rises offset by more price falls. Case in point: gold rose briefly to $1,250 an ounce in October before falling to $1,142 by November. Since then it has seen incremental rises as part of a larger trend of falling oil prices.

The collapse of the oil market — largely caused by OPEC’s refusal to cut production guidelines — has led to historic lows in the oil market. Oil touched a five-and-a-half year low on Monday, dropping below $50 a barrel, with continued drops seen on Tuesday. The Russian ruble is hemorrhaging value, and global brands such as Apple (NASDAQ:AAPL) have pulled out of the country as prices fluctuate too wildly to sell products.

As oil prices have fallen, gold prices have risen, seeing growth ever since the OPEC announcement regarding oil production. Specifically, since that time, gold prices have risen 6 percent and are up over 1 percent since the close of markets on Friday.

The reason gold is reacting so well to oil’s poor performance is that global markets have slumped due to the fuel’s woes, increasing investors’ desire for a safe haven. To give readers a comparison, 1 ounce of gold today equates to 25.375 barrels of oil. According to Bloomberg, gold set a month-end record at 41.4 barrels of crude in June 1973 before retreating. The subsequent most recent high was 20 barrels per ounce of gold, reached in October 2012.

Securities Disclosure: I, Nick Wells, hold no direct investment interest in any company mentioned in this article.