The ongoing decline in crude oil prices has been covered extensively by the financial media. Over the last year or so, crude oil has fallen from over $65 per barrel to under $30 per barrel, losing over half its value in the process. The recent move towards $30 per barrel has shaken stock markets and driven increasing volatility and risk aversion.
What Might this Mean for Gold?
It is no secret that gold and oil, or “black gold,” often exhibit a positive correlation. As crude oil prices have fallen sharply this year, gold prices have also declined, albeit not to the same degree. With crude oil currently trading near the $30 per barrel mark, you have to ask yourself just how much further prices could potentially fall. Could we see $20 per barrel? Could we even see $10 per barrel?
The current decline in oil is a function of supply and demand. The market is simply flooded with crude while demand is stagnant or even declining. Recent developments in China and concerns over the world’s second largest economy are only exacerbating the selling in oil.
In addition, it is no secret that a price war of sorts is currently underway. The major oil producers of the world, OPEC, seem intent on wiping out the competition by keeping prices at depressed levels for as long as necessary. Would-be competitors cannot afford to pump oil or expand with crude below a certain price threshold. Saudi Arabia, however, has enough cash put away to keep prices depressed for a very long time.
While further downside in crude oil prices may be seen before all is said and done, the price of crude is not going to zero…
In fact, there will be a turning point for crude…
And when crude oil prices turn, they could take gold prices along for the ride.
One of the major reasons for gold’s lack of upside in recent years is the lack of inflation. Asset prices have been declining and as of today, deflation may be a much greater concern.
While we believe that gold prices could potentially benefit significantly in either scenario, we are of the belief that crude oil prices will rebound eventually.
And all we can say about the gold market when they do is: LOOK OUT…
We believe that significantly higher crude oil, along with increasing inflationary pressures will be seen. It may not be tomorrow, next week, next month or even next year. But at some point, all of the money that has been injected into the global financial system will lead to growing inflation.
A significant rebound in oil prices could be a tell-tale sign that inflation may be on the rise.
Gold and other precious metals could stand to benefit significantly in such a scenario. Gold has long been regarded as a protector of purchasing power and an effective hedge against inflation.
With both of these asset classes possibly “bottoming out” at the same time, the possibility of a significant rise in both exists.
Would you rather buy gold at $1100 per ounce or $1500 per ounce?
Would you rather stay ahead of inflation or suffer the erosion of your hard-earned savings?
If you want to be proactive and take steps to protect your portfolio and purchasing power, NOW is the time for action.
We believe that gold at current prices represents an excellent value a means of getting ahead of inflation and rising future prices.
In short, crude oil will turn, and we believe gold will turn along with it.
Your IRA account may be the ideal vehicle for gaining exposure to physical precious metals. A gold or silver IRA account allows you to save for your financial future while acquiring assets that may protect your purchasing power. Don’t wait for higher energy prices and inflation to rise. Begin building your holdings now.
We encourage you to speak with an Advantage Gold account representative today. Our professionals can answer any questions you may have about buying physical precious metals and can assist you in using your IRA to protect your financial future. Don’t get behind the curve. Call us today at 1-800-341-8584.