Should You Buy Gold When Oil Prices Are Falling?

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Oil Pipeline in Qatar
Oil Pipeline in Qatar

Oil prices have continued to fall over the past week to sub $60 per barrel prices, which are prices that have not been seen in the past several years. While this is a windfall for consumers who are enjoying paying less than $2.50 a gallon for their petroleum during this holiday season, the question remains is whether this is a good sign for the economy.

 

For investors that are looking to invest in precious commodities such gold and silver, various signs may be pointing to a green light to invest in gold and silver even though the price of gold remains stable at around $1,200.00 and once, and silver a little less than $16.00 per ounce, it does not take much for the price of both precious metals to sour. The drop in oil price is reflecting a 40% decrease in the price of oil per barrel.

 

Publicly, commentators vary as to the reason why, but privately a host of issues are at foot including the instability of the Russian Ruble, the actions of the U.S. Federal Reserve to back off of quantitative easing and the European Central Bank’s action to increase its quantitative easing program. Additionally, the key leaders following the recent G20 summit this fall announce an infusion of significant liquidity into the global markets. The scale of these various economic activities in of themselves does not project doom but they do project “uncertainty” in what will happen in the global markets in the immediate future.

The best time to buy gold and silver is not when the market can be tightly predicted but just the opposite and that is when there is gross uncertainty in the market.

1 COMMENT

  1. […] Dollar cost averaging works for commodities and precious metals too  The most common reason why many investors aren’t on gold like white on rice is because they suspect the shiny yellow stuff will keep sinking. I don’t get this reservation. I really don’t. I mean, if you are excited about a stock, you’ll know a thing or two about dollar cost averaging. This means you buy in at a certain price. The stock continues to crash and you buy even more at the new lower price. You keep chasing the stock downward buying more and more shares each time. The strategy being your volume purchases dilute the average per share price you bought. If you do dollar cost averaging right, it might not take much of a rise in your stock’s price for you to break even and start making a paper profit. Earlier: Should you buy gold when oil prices are falling  […]

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